Estate planning concerns the effective transfer of wealth from one generation to the next. An effective plan will ensure that assets pass to the intended beneficiaries in a way that will meet the desires of the deceased, the needs of the beneficiaries, and minimise any tax burden.

A will is a critical part of an estate plan. Without a will, the distribution of a deceased’s assets will be made according to a government formula. The formulae vary from state to state, and may not reflect the wishes of the deceased, or the needs of the beneficiaries. But important as the will is, it’s only one part of the estate plan. Many people are unaware that they don’t actually own what they think they do, and some of their most significant assets may not be covered by the will at all.

Jointly-owned assets

It is common for couples to jointly own the family home. When one dies, the other automatically becomes the sole owner. The home isn’t covered by the will, and doesn’t pass through the estate.

In most situations this isn’t a problem, but what if two brothers buy an investment property together? If they are joint owners and one dies, the other becomes the sole owner. The deceased’s family could lose a valuable asset, or need to take expensive legal action to resolve the problem. A better option is for the investment property to be purchased as tenants in common. In this case each brother has ownership of a specified share of the property, which can then be transferred via a will.

Superannuation

Superannuation forms an increasingly large component of the assets to be distributed upon death. It is possible to nominate a legal personal representative (i.e. the estate) as the beneficiary of a superannuation death benefit, and therefore have it dealt with under the will. However, if the nomination isn’t binding upon the trustee of the superannuation fund, the trustee must decide who the dependants are and make the distribution accordingly. This may not be in line with the wishes of the deceased.

Family trusts and companies

Family trusts and companies are common business and investment structures. Whilst a business owner may transfer shares in a company via a will, the physical assets are owned by the company, not the deceased. Assets owned by a family trust also fall outside the scope of wills. In this case the estate plan needs to provide for the effective transfer of control of the trust.

These are just a few of the issues that need to be addressed by an estate plan. It’s a complex topic, particularly for people with a range of financial structures, and development of an effective plan requires the involvement of a lawyer who is properly qualified in this area.