We recently provided advice to a young couple Rob and Simone who were both around 40.  They have two young children under the age of 10 and Rob has a daughter from a previous marriage who is now 20 and financially independent.

Rob was diagnosed with a terminal illness and given only a short time to live when he saw us and he wanted to ensure that his financial affairs were in the best condition they could be before his death.  Rob’s will simply left all of his assets to Simone but upon exploring the family structure it became clear that Rob’s adult daughter may seek to contest Rob’s estate which could prove costly and stressful (other than to lawyers).

This situation reinforced the need to be clear on ownership of assets when estate planning and yet we are constantly amazed at those who seek to undertake estate planning without regard for ownership.

Their assets consist of:

Asset                                                     Owner                                  Value

House                                                   Joint (Joint Tenants)       $600,000

Car                                                         Simone                                 $25,000

Superannuation                                  Rob                                        $650,000

(including insurance)

Shares                                                  Rob                                        $30,000

Unused Leave                                   Rob                                        $50,000 (after tax)

The key issue at stake was to limit the value of assets paid to the estate that could be subject to a legal contest.  We would add that prior to Rob’s ultimate death, his adult daughter openly discussed how she would like to use his superannuation monies to buy a house with her boyfriend, completely disregarding her father’s wishes.

Let’s examine what could potentially be paid into Rob’s estate and we begin by confirming that as their house is owned jointly as joint tenants, ownership will pass to Simone.  The only assets that could pass to Rob’s estate could be his superannuation, unused leave and his shares.

In order to restrict the assets paid to the estate, we ensured that Rob completed a binding death benefit nomination to his superannuation fund that directs the trustees of the fund to pay the superannuation benefit to Simone.  If this was not done, the decision about who to pay superannuation proceeds to, would be made by the trustee of the super fund.  In the event of a dispute between Simone and the adult daughter, this could lead to the trustee taking the view that they simply pay the superannuation to the estate and remove the possibility of being caught in the middle of a dispute.

Rob’s shares were sold and the proceeds paid to Simone.  The alternate course of action would have been to simply transfer ownership to Simone, but Rob wanted to sell the shares anyway.

This effectively meant that the only asset that was to be paid into Rob’s estate was his unused Leave entitlements.

Whether Rob was sufficiently insured is not for discussion in this article.  We are focussed solely on ensuring that the ownership of assets was such that they were not to be paid into Rob’s estate and subject to a legal contest.  With the exception of unused leave entitlements this has been done.

Effective Estate Planning is all about ensuring that your assets go to where you intend, in the most tax efficient manner and the most effective manner.  When planning your estate it is critical that your adviser consider the ownership of your assets in addition to your family structure.

Note: Advice contained in this article is general in nature and does not consider your particular situation or needs. If information contained is not appropriate to you at this stage please pass on to family and friends who may benefit. Please do not act on this advice until its appropriateness has been determined by a qualified adviser.


Published in Making A Will