Trying to fairly look after people in your Will it pays to really understand what you do & don’t own

Recently I saw the sad consequences of someone not dealing properly in their Will with their jointly owned real estate.

I think most people these days are aware that you can own real estate with someone else in two ways – as a joint tenant, or as a tenant in common. Most people are probably also aware that if you own real estate as a joint tenant, you can’t gift your interest in your Will – as, on your death, your interest will immediately pass to the other joint owner/s. However if you own as a tenant in common, your share can be left to someone you name in your Will.

Unfortunately people often forget to consider how they own property at the time they give instructions for making their Will.

We recently had a situation where a father owned two properties jointly with other people. He left “his half” of one property to his only son and “his half” of the second property to his only daughter. Unfortunately the property left to the daughter was owned as joint tenants and the property passed on the father’s death to the other co-owner and never formed part of the father’s estate, effectively disinheriting his daughter.

Real estate is not the only asset type that has special rules that will apply to its transfer when the owner dies – jointly held property, superannuation and life insurance are other common assets that are subject to special rules.

Any asset you own jointly as a joint tenant will on your death go directly to the surviving owners, by-passing your Will completely. For example, if you have a share portfolio in joint names with your siblings, on your death the shares will automatically become your siblings’ shares.

If you want to gift jointly owned property to someone else in your Will, you need first to change the ownership to tenants in common – a relatively simple legal process.

The proceeds of any life insurance policy will on your death go directly to the beneficiary/ies nominated in the Policy, by-passing the Will completely – unless your “estate” is the beneficiary nominated in the Policy.

Make sure the person/s you have nominated as the beneficiary of the Policy is still who you want it to be and that the policy allows for payment to this person. It is prudent to diarise to check this from time to time to make sure the situation remains relevant to your circumstances.

We recently saw a situation in which a young man passed away and his life insurance did not go to his dependant wife of four years, but instead went to his father (named as beneficiary of the policies) with whom he had a falling out some years before!

The proceeds of any superannuation fund that is not a self-managed superannuation fund will on your death be distributed to any one or more of your dependants at the discretion of the Trustee of your superannuation fund.

However, if when you die you have in place a valid binding death benefit nomination that nominates a dependant of yours or your “estate” as the beneficiary/ies, the Trustee must comply with your nomination.

A dependant is defined to include your current spouse/defacto, your child or children (including adopted children) of any age, or a person financially dependent on you at the time of your death.

“Binding death benefit nominations” only have an effective life of three years – this means if you want to decide who gets your superannuation, you have to ensure you validly update your binding death benefit nomination at least every three years – you should diarise to do this as required.

Without such a valid nomination in place at the time of your death, the Trustee can decide to distribute your superannuation to any one or more of the dependents referred to above, not necessarily the ones you would have chosen.

If you have a self-managed superannuation fund, your Trust Deed may need to be updated to incorporate provisions to allow binding death benefit nominations, and may also be amended to allow for “perpetual” binding death benefit nominations rather than requiring a renewal every three years.

I trust this has been of interest. If you have any questions about any aspect, please feel free to contact our Wills & Estates Team.

Turnbull Hill Lawyers, and specifically Adrian Corbould, have been named in the prestigious 2024 Doyles Guide. Both have been listed in the guide since 2018.