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- Herausgeber: John Wiley & Sons
- Kategorie: Ratgeber
- Sprache: Englisch
Have you prepared your legacy? Get peace of mind for you and your loved ones tomorrow by planning your estate today.
Wills and Estate Planning: The Essential Guide for Australians will help you make a plan to leave your wealth to your selected beneficiaries, protect your financial legacy and avoid family disagreements. This plain-English guide makes estate planning easy, providing exactly what you need to know to get started.
You have spent substantial amounts of time and energy building your life as it is now. But have you planned for how your wealth and assets will be distributed after your death? Many people prepare a will only when a life event brings the topic sharply into view—ike the death of a loved one or a personal health issue. But being proactive and planning your estate today can help you avoid significant time pressure and emotional stress.
Wills and estates expert Andrew Simpson shares his extensive knowledge in this clear, jargon-free guide. From planning your retirement to writing a will and distributing your assets, Wills and Estate Planning covers the fundamentals and answers your questions. Inside, you'll find informative case studies, practical examples and easy-to-read explanations.
Designed specifically for readers with little to no experience with wills and estate planning, this book will help you:
- Create a secure, legitimate estate plan: understand your assets, draft your will and protect it from legal challenges
- Navigate complex topics: use trusts to safeguard your assets, your superannuation and your financial legacy
- Avoid costly mistakes and minimise tax burdens for yourself and your family
- Know what to look for when choosing a professional estate planner
With the latest financial and tax guidelines, this is a must-have resource for anyone seeking to confidently pass on their wealth to future generations. Wills and Estate Planning is for anyone who wants a simple, stress-free way to sort their affairs and enjoy peace of mind.
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Veröffentlichungsjahr: 2025
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Table of Contents
Cover
Table of Contents
Title Page
Copyright
About the author
Acknowledgements
Preface
Part I: Understanding estate planning
Chapter 1: What is estate planning?
Why is estate planning important?
Features of estate planning
Chapter 2: Estate assets
What forms part of the estate?
Joint tenants versus tenants in common
Dealing with the succession of non-estate assets
Chapter 3: Intestacy
Common reasons for not preparing a will
How does intestacy occur?
Unwanted consequences of intestacy
Absence of protective safeguards
Part II: The will
Chapter 4: Planning your will
Personal circumstances
Legal requirements for the preparation of a will
Homemade wills
Chapter 5: Appointment of executors
Duties of an executor
Appointing more than one executor
Appointing a professional executor and trustee
Administration where there is no will
Death of an executor
Removing an executor
Chapter 6: Contents of the will
Name and address of the will maker
Revocation of previous will
Appointment of executors and trustees
Powers of executors and trustees
Special requests
Who gets what
Gift of investment assets
Distribution of personal chattels
Appointment of guardians for minor children
Timing of gifts
Disclaimer of an estate interest
Adjusting beneficiary entitlements
Superannuation
Gifts and loans
Gifts to charity
Chapter 7: Updating, revoking and storing your will
Will revocation
Storing your will
Chapter 8: Protecting your will from challenge
Challenge to your will for lack of provision
Agreements not to challenge
Strategies for defeating a claim
Time limits for bringing a claim
Myths regarding claim for provision
Invalidity of a will
Challenging validity
Part III: Trusts and estate planning
Chapter 9: An introduction to trusts
Why use a trust?
Parties to a trust
The trust deed
Construction of the deed
Other sources of powers of the trustee
Elements of the trust
Lifetime of a trust
Determining the vesting date
Amending a trust deed
Avoiding a resettlement
Chapter 10: Types of trusts
Discretionary trusts
Unit trusts
Hybrid trusts
Estate-planning implications of unit trusts and hybrid trusts
Chapter 11: Testamentary trusts
What is a testamentary trust?
Considering the use of a testamentary trust
Beneficiary-controlled testamentary trusts
Simple will versus beneficiary-controlled testamentary trust
Chapter 12: Capital-protected and protective trusts
Capital-protected trusts
Protective trusts
Special disability trusts
Chapter 13: Proceeds trusts
Child support trusts
Estate proceeds trusts
Superannuation proceeds trusts
Part IV: Taxation and superannuation
Chapter 14: Taxation and death
What is capital gains tax?
Calculating the cost base
Capital gains tax on the disposal of estate assets
Income tax
Chapter 15: Death and superannuation
Recipients of death benefits
The decision to pay death benefits
Non-binding death benefit nominations
Binding death benefit nominations
The trust deed
Taxation of superannuation death benefits
The relevance of your will
Death benefit challenges
Future control of self-managed superannuation funds
Part V: Lifetime planning
Chapter 16: Powers of attorney
What is a power of attorney?
Types of powers of attorney
Legal requirements
Use of a power of attorney
Supervision
Revocation
Jurisdictional questions
Witnessing requirements
Chapter 17: Binding financial agreements
Chapter 18: Business succession and estate planning
Surviving business partners and shareholders
Forms of funded business succession agreements
Shareholder and unitholder agreements
Other issues to consider
Ownership and disposal of your business
Taxation issues
Chapter 19: Life insurance
Why do I need life insurance?
Don't just insure the breadwinner
When should I consider life insurance?
Life insurance and business proprietors
Will my superannuation cover me?
How much life-insurance cover do I need?
Income protection — policy definitions
Chapter 20: Planning ahead — arranging your funeral
Record all personal details
Funeral expenses
Content of funeral service
Pre-arranging your funeral
Part VI: Estate planning and elder law
Chapter 21: Centrelink and estate planning
Qualification for age pension
Granny flat interests
Chapter 22: Centrelink and the treatment of private trusts and companies
Treatment of private trusts and companies
Is the private trust or company considered an asset for Centrelink purposes?
Determining the value of assets
Allowable liabilities
Surrender of control
Application of provisions to testamentary trusts
Estate-planning consequences
Chapter 23: Reverse mortgages
What is a reverse mortgage?
How will a reverse mortgage affect my Centrelink entitlements?
Advantages of a reverse mortgage
Disadvantages of a reverse mortgage
Other alternatives
Estate-planning implications
Chapter 24: Aged care
Transition into aged care
Am I eligible for aged care?
Types of care available
Fees and charges
Gifting of assets prior to entering aged care
Estate-planning implications of aged care
Chapter 25: It's up to you now
Glossary
Appendix
Index
End User License Agreement
List of Tables
Chapter 8
Table 8.1: time limitations for will challenge
Chapter 14
Table 14.1: the CGT cost base
Chapter 16
Table 16.1: power of attorney documents per state or territory
Chapter 18
Table 18.1: ownership and succession of a business
List of Illustrations
Chapter 1
Figure 1.1: the relationship between clients and advisers
Chapter 2
Figure 2.1: joint tenant ownership
Figure 2.2: tenants in common ownership
Chapter 10
Figure 10.1: family trusts
Figure 10.2: unit trusts
Figure 10.3: hybrid trusts
Chapter 11
Figure 11.1: beneficiary-controlled testamentary trusts
Chapter 12
Figure 12.1: capital-protected testamentary trusts
Guide
Cover
Title Page
Copyright
About the author
Acknowledgements
Preface
Table of Contents
Begin Reading
Glossary
Appendix
Index
End User License Agreement
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This third edition first published 2025 by John Wiley & Sons Australia, Ltd.
First edition published by Wrightbooks (an imprint of John Wiley & Sons Australia, Ltd.) in 2009 as You Can’t Take It With You. Second edition published by John Wiley & Sons Australia, Ltd. in 2019 as The Australian Guide to Wills and Estate Planning.
© 2025 Andrew Simpson
All rights reserved, including rights for text and data mining and training of artificial intelligence technologies or similar technologies. Except as permitted under the Australian Copyright Act 1968 (for example, a fair dealing for the purposes of study, research, criticism or review) no part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise. Advice on how to obtain permission to reuse material from this title is available at http://www.wiley.com/go/permissions.
The right of Andrew Simpson to be identified as the author of Wills and Estate Planning (3rd edition) has been asserted in accordance with law.
ISBN: 978-1-394-33770-5
Registered OfficeJohn Wiley & Sons Australia, Ltd. Level 4, 600 Bourke Street, Melbourne, VIC 3000, Australia
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Limit of Liability/Disclaimer of WarrantyWhile the publisher and author have used their best efforts in preparing this work, they make no representations or warranties with respect to the accuracy or completeness of the contents of this work and specifically disclaim all warranties, including without limitation any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives, written sales materials or promotional statements for this work. This work is sold with the understanding that the publisher is not engaged in rendering professional services. The advice and strategies contained herein may not be suitable for your situation. You should consult with a specialist where appropriate. The fact that an organisation, website, or product is referred to in this work as a citation and/or potential source of further information does not mean that the publisher and author endorse the information or services the organisation, website, or product may provide or recommendations it may make. Further, readers should be aware that websites listed in this work may have changed or disappeared between when this work was written and when it is read. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.
Cover design by Wiley
About the author
Andrew Simpson is a Principal Lawyer at Andrew Simpson Legal. Andrew holds a Bachelor of Arts and a Master of Laws. He has been practising in the area of estate planning, estate administration and elder law for 25 years.
Andrew is the author of a chapter on estate planning and estate administration in the Australian Master Financial Planning Guide.
In 2004 Andrew was awarded a Churchill Fellowship and spent time in the United States, Canada and the United Kingdom examining international approaches to estate planning and other aspects of elder law.
In addition to advising clients on the creation and implementation of an estate plan, Andrew also enjoys conducting workshops and information seminars for community groups on estate planning. The questions and comments that have arisen during these sessions have informed much of the book’s content
Andrew is married to Jane and has four children.
Acknowledgements
I gratefully acknowledge the contributions of Allan Swan, Laura Evans-McKendry, Lachlan Einsiedel and Naomi de Costa all of whom provided invaluable assistance with some of the technical aspects of the book.
To my wife Jane and children Oliver, Edward, Archer and Phoebe, thank you for granting me the indulgence of spending valuable family time on this project.
To my folks, John and Judith, and my brothers, Philip and Luke, and to Lara and Amalia. I hope you enjoy the references to you and your respective clans throughout the case studies.
Preface
When it comes to estate planning, and particularly the preparation of a will, there are a two common themes. Firstly, most people have been planning to make a will for a number of years, but for one reason or another, they have struggled to get themselves organised. In many cases the ultimate call to action is prompted by circumstances: an imminent overseas trip, the death of a close friend or relative or a personal health scare. This is not ideal. In these examples there is usually a time pressure or other emotional challenge that makes the process of will creation more difficult and confronting.
The second theme is that at the end of the estate planning process, most people say ‘It wasn't as hard as I thought it would be. I should have done it sooner’. This is coupled with a sense of relief that the process is complete and can finally be ticked off the ‘to-do list’.
In the last 25 years, I have spoken to hundreds of groups of people about estate planning. It has been an enjoyable and fascinating exercise. What I have discovered during these sessions is that while most people know what a will is, the process for its preparation is a mystery to many. It is also clear that the term ‘estate planning’ is not well understood. There is not a lot of information available that explains the process in detail. Therefore, many questions remain unanswered. For example:
Where do I start? Who do I talk to?
Do I need a lawyer, and if so, where do I find one with the necessary expertise?
What documents do I need to prepare?
Is it going to cost me thousands of dollars? Can I do my own estate planning?
How long will it take?
What information do I need to provide?
The purpose of this book is to help answer these questions and enable you to face your estate planning with confidence. The book is intended to be practical. Wherever possible, information is explained by the use of case studies, most of which are based on real examples. There are also references to other resources to enable you to take your research further if you wish.
If you have already completed your estate planning, you are to be congratulated. However, remember that estate planning is something that requires review on a regular basis. This book may help you identify areas that you need to revisit.
The book is not written for professionals working in the field. It has been written specifically for Australians with little or no knowledge or technical expertise in the area of estate planning. For this reason, technical language has been kept to a minimum, and a glossary is provided to explain legal terms where they are used.
The scope of the book is intentionally broad. This is because estate planning has many aspects to it and each set of family circumstances is different. There may also be more than one potential solution to your estate-planning issues. That being said, estate planning is relevant to people of all ages regardless of how simple or complicated their financial or family arrangements might be.
The good news is that estate planning is usually straightforward and can be completed in a matter of days if need be. However, a word of caution: the body of relevant law is vast and complex, and the consequences of getting it wrong are significant. The ill feelings and arguments caused by an invalid or ambiguous will can be permanently damaging to family relationships and can also result in costly legal disputes.
This book is not intended as a substitute for legal advice; nor is it a ‘do it yourself’ guide. While it is comprehensive in its discussion, it does not attempt to deal with every possible estate-planning scenario. It is strongly recommended that you seek legal advice in implementing your estate plan.
One final word: if you have been contemplating your estate planning for a long time, remember the age-old proverb: ‘there is no time like the present.’
Andrew Simpson
Melbourne
February 2025
Part IUnderstanding estate planning
Chapter 1What is estate planning?
Many people despise wealth, but few know how to give it away.
Francois de La Rochefoucauld
While most of us would prefer not to think about it, we all face a number of inescapable truths:
Whether we like it or not, all of us will die.
The timing of our death is unknown.
We can't take anything with us when we die!
We have a simple choice: do we plan for this inevitable event, or do we choose to ignore it and hope that everything will somehow work out?
Estate planning is the process of planning and recording your wishes for the distribution of your wealth after death. This definition appears straightforward. For this reason, it is often assumed that ‘estate planning’ refers only to the preparation of a will. In some cases, it is not this simple. There are aspects of estate planning that go beyond the will. For example, how are family trust assets to be dealt with? What happens to superannuation? How are jointly held assets treated?
In understanding estate planning, the term itself is helpful. It describes the two essential aspects:
‘Estate’ — indicates that the process is concerned with a period of time following your death. This aspect is guaranteed: we are all mortal.
‘Planning’ — refers to the need to organise your affairs during your lifetime. This aspect is not inevitable. It requires action.
Why is estate planning important?
Wealth creation and wealth preservation tend to be popular pastimes. Most of us aspire to financial security and do what we can to achieve it. The enormous growth in the financial-planning industry in the last 20 years confirms this. However, the distribution of wealth after death has not held the same fascination. This has changed in the last decade or so. The importance of planning the distribution and succession of wealth is now an essential part of personal and financial planning. There are a number of possible reasons for this:
Overall wealth has increased. This is due partly to the significant increase in superannuation contributions since the introduction of the superannuation guarantee in 1992. It can also be explained by the real estate boom that has occurred in most states of Australia that has seen the median house price in the capital cities increase significantly.
Australia's social fabric has changed enormously. The traditional family structure is now no longer the norm. Data from the Australian Bureau of Statistics in June 2016 predicted that the number of couple families without children is projected to become the most common family type in Australia between 2023 and 2029. Statistics have also confirmed that in recent decades trends in divorce and remarriage have contributed to changing numbers of one-parent, step and blended families. As a result, more deliberate planning is required to deal with such diversity.
The use of alternative investment structures such as trusts, companies and self-managed superannuation funds has increased. The Australian Taxation Office estimates that as at 30 June 2022 there were more than 600 000 self-managed superannuation funds in existence in Australia (an increase of 8% since 2017–18) with more than 1.1 million members.
Australia's population is ageing. Figures provided by the Australian Bureau of Statistics suggest that 15 per cent of the Australian population is currently aged 65 and over. By 2030 this percentage is predicted to be more than 20 per cent. The number of Australians aged 85 and over is expected to quadruple between 1999 and 2051. The life expectancy of Australians is also increasing. This changing demographic has brought with it novel estate-planning issues that tend to be age specific, such as the consequences of a reverse mortgage and the implications of a move into aged care.
These and other related topics are discussed in part VI.
Features of estate planning
Thorough estate planning has a number of characteristics, outlined as follows.
Estate planning must be tailored
As every person and every family is different, an estate plan needs to be tailored to your specific circumstances. Your estate plan will not be the same as your neighbours'. The view that one plan suits all is a dangerous one. A detailed review of your circumstances will identify unique estate-planning issues that will need to be addressed. Examples of these issues may include:
family members who require special treatment because of a disability, addiction or other health concern
antiques, family heirlooms or collectables that need to be dealt with specifically
business interests
family circumstances, such as a second marriage or children from different relationships
potential challenges to your will
the existence of a self-managed superannuation fund or other trust structure.
Estate planning needs to be flexible
Your estate plan needs to be flexible enough to deal with a change to your circumstances and to the circumstances of your beneficiaries. Wherever possible, you should avoid locking future generations into arrangements that may become restrictive and unworkable. Examples of such arrangements include the creation of life interests, and binding directions requiring the indefinite retention of estate assets.
Case study
Constance leaves a will that directs that her family home is not to be sold until all her children have died. Her intention is to ensure that her children have a home to return to should they find themselves in financial difficulty or experience a relationship breakdown. At her death, none of her children want the house retained and would prefer it to be sold and the proceeds divided. The prospect of maintaining the property for the rest of their lives is not one that appeals to any of them.
Estate planning must be understood by you
It is important that you understand your estate plan, and that it can be understood by others, including your executor and family members who survive you. If you do not understand it, there is a very good chance that others will also have difficulty. Unnecessary complexity and ambiguity may serve to defeat your intentions. Remember, when your will is administered, you will not be present to explain what you intended; your intentions must be clear from the terms of the will. For example, if your will contains a specific gift of personal items such as jewellery or artwork, the description of the relevant item needs to be precise. For a further discussion of personal chattels, see chapter 6.
Estate planning must be reviewed regularly
Your estate plan should be regularly reviewed. Estate planning is not a discipline that relies on the ‘set and forget’ principle. A five-yearly review at a minimum is recommended, however there may be circumstances that justify more regular reviews.
Following is a list of circumstances that would justify an estate-planning review and/or a meeting with your adviser to determine whether your estate plan requires amendment:
marriage, separation or divorce
entering into or ending a de-facto relationship
having children (including adopted or foster children)
the death of a proposed beneficiary
other major events occurring in your family
major events affecting your assets, including the disposal of an asset that is referred to in your will
a change in the need to ensure a gift for spendthrift, intellectually disabled or bankrupt beneficiaries is protected under the will
a proposed beneficiary qualifying for a means-tested social security pension
a change to the extent to which your beneficiaries will benefit from other sources, such as jointly held assets, superannuation and life-insurance proceeds, and family trust distributions
changes to the taxation laws
the death, ageing or ill health of your proposed executor
the establishment of a family trust or a new business venture
the transfer of assets to a business or family trust
the existence of trust income allocated to a beneficiary that has not been paid to or applied for the benefit of the beneficiary that may require adjustment. For a further explanation of this issue, see
chapter 6
the desire to implement a plan for business succession. Business succession agreements are discussed in
chapter 18
.
Estate planning is the result of collaboration between professional advisers
Where you have existing professional advisers, thorough estate planning relies on the collaboration and cooperation of all of these advisers. The process is illustrated in figure 1.1.
Figure 1.1: the relationship between clients and advisers
Each person shown in figure 1.1 has specific knowledge and skills that are drawn on during the estate-planning process. These are outlined as follows:
The client understands his or her personal circumstances, beliefs, values and long-term goals and objectives.
The financial planner has financial and investment expertise and understands the nature of the client's investment portfolio and risk profile.
The accountant possesses knowledge of the client's business structures, such as trusts, companies and their self-managed superannuation fund (if applicable).
The lawyer understands the documentation and the legal requirements necessary to give effect to the estate plan and has expertise in drafting legal documents.
Estate planning relies on thorough data collection
Your legal adviser's ability to advise you on your estate-planning needs depends almost entirely on the integrity of the data-collection process. Your adviser must understand your personal, investment and business circumstances. This can be a time-consuming process, but it is unavoidable if your adviser is to properly advise you. The kind of information that your adviser should be made aware of includes:
your financial circumstances, including a summary of your assets and liabilities
the circumstances of your children and other potential beneficiaries, including marital status, occupation, business interests, disabilities or other factors that might affect their ability to manage money
the existence of family trusts and companies and business interests
the nature, extent and ownership of superannuation and life insurance cover
the identity of people who are financially dependent on you.
Prior to your initial meeting with your legal adviser, you should prepare a personal profile document containing information such as:
your personal details
your marital status, including previous marriages (if applicable)
the names, ages and correspondence details of all your children and their proposed guardians (if applicable)
any special needs your beneficiaries may have that will affect their ability to manage an inheritance
the executors you wish to nominate
the existence of enduring power of attorney
your business structure, including details of your superannuation and life insurance.
The provision of this information will ensure that your adviser is fully informed about your circumstances and will make the process more cost effective. It is also a good idea to give your legal adviser permission to discuss your financial and business affairs with your other advisers.
Chapter summary
Estate planning is not just the domain of the asset rich; it affects everybody, regardless of their circumstances. Hopefully, this introduction has assisted you in understanding some of the fundamental principles behind the process. You should now be ready to consider some of the specifics. The purpose of chapter 2 is to assist you in identifying what assets form part of your estate and what assets do not.
Chapter 2Estate assets
Nemo dat quod non habet.
No-one gives what they do not have.
Understanding what assets you own is the necessary first step in the estate-planning process. Without this knowledge, you will be unable to make decisions about who gets what after your death. Many of us assume that by preparing a will, we will be able to give away all the assets that we own, control or have an interest in. For many of us this is not necessarily the case, and our ability to give away assets depends entirely on the nature of the asset and its precise ownership arrangements.
It is for this reason that your legal adviser will usually insist on reviewing copies of relevant documents such as trust deeds and titles, and will want to speak with your other advisers.
What forms part of the estate?
Following is an explanation of the assets that form part of your estate.
Estate assets
Generally, assets owned in your personal name form part of your estate, and can be disposed of by your will. These include:
real estate
personal chattels (including jewellery, antiques, furniture and clothing)
shares, bonds and debentures
cash investments
loans made by you to the trustee of a trust
income and capital allocated to you from a trust
an interest in assets held with another person as tenants in common. The term ‘tenants in common’ is explained later in this chapter.
Non-estate assets
Assets that are controlled but not owned or wholly owned by you are referred to as ‘non-estate assets’. Non-estate assets cannot be disposed of by your will. They include:
assets that are owned jointly with another person (usually described as ‘jointly held assets’) — most commonly, the family home
the unallocated assets of a family trust
superannuation, subject to member direction and trustee discretion
life-insurance proceeds (depending on the ownership)
account-based pensions or annuities that have a reversionary beneficiary
business interests.
Case study
After years of procrastinating, Bert and Ethel have finally decided to attend to their estate planning. Their previous wills were made in 1971 when they were newlyweds. Circumstances are now very different. Their financial adviser has strongly suggested that it is time to review and update their estate planning. Bert and Ethel have three adult children and three major assets:
their family home
an investment unit
a beach house on the coast.
After much thought and deliberation, Bert and Ethel decide to draft wills leaving one property to each of their children.
What Bert and Ethel have forgotten is that when they purchased the investment unit and the holiday house, their accountant advised them to purchase both properties in a family trust for asset-protection purposes. It is not until their lawyer makes contact with the accountant and undertakes a title search for each of the properties that she realises that the only piece of real estate owned by Bert and Ethel is the family home. This caused Bert and Ethel to rethink their plans. As they don't own the investment unit and the beach house, Bert and Ethel are unable to give them directly through the will.
Case study
Oliver is about to start a new business. As part of his preparations for the new venture, he creates a family trust and transfers substantial cash reserves from his own name to the trustee of his family trust. He prepares a short agreement documenting the transaction. The nature of this agreement has important asset-ownership consequences. For example:
If the document is a loan agreement, the transferred funds remain part of Oliver's personal estate. The funds will be distributed as part of Oliver's estate.
If the agreement is a deed of gift, the funds cease to be owned by Oliver. In this instance, the funds are not governed by the terms of Oliver's will. Like Bert and Ethel, Oliver will not be able to dispose of this particular asset through his will.
It is important to ensure that you fully understand your asset-ownership position. Do not rely solely on your memory — you must be precise about your ownership arrangements.
It is also important to provide copies of all relevant documents to your adviser for review and confirmation of asset ownership. This will ensure accurate advice and will make the process more cost effective. You should provide your adviser with the following documentation and information:
copies of earlier wills
trust deeds for trusts and superannuation funds
trust balance sheets
your last personal tax return
superannuation death benefit nominations
the constitution for private companies
details of life-insurance cover and its ownership
title searches for real-estate assets
any other relevant documents, such as shareholder/ unitholder agreements and buy/sell agreements.
Joint tenants versus tenants in common
Co-ownership of a property is divided into two categories:
joint tenancy
tenancy in common.
Understanding the difference between the two is essential. The defining features of a joint tenancy are as follows:
All joint tenants have an interest in the whole asset.
The surviving joint tenant has a right of survivorship. Upon the death of one joint tenant, the remaining joint tenant (or tenants) continues to hold the total ownership of the property.
The interest of the deceased joint tenant dies with him or her (unless he or she is the last surviving joint tenant).
Joint tenant ownership is illustrated in figure 2.1.
Figure 2.1: joint tenant ownership
In contrast, tenants in common have a discrete share in the property. Upon the death of a tenant in common, his or her interest in the property does not automatically pass to the other tenants but rather passes in accordance with the deceased tenant's will.
Tenants in common ownership is shown in figure 2.2 (overleaf).
Joint tenancy is presumed in the absence of a contrary intention. Attention should be paid to the distinction between joint tenancy and tenants in common where you are:
intending to make a specific gift of property to a beneficiary
contemplating the preparation of a testamentary trust will. A jointly owned asset will pass immediately to the surviving joint tenant and will not form part of your estate. For this reason, it can't pass into a testamentary trust. This may produce undesirable results, particularly where the expectation was that an asset would pass into a testamentary trust. For a detailed discussion of testamentary trusts, see
chapters 11
and
12
.
Figure 2.2: tenants in common ownership
It is possible to rebut the presumption of joint tenancy by declaration. However, careful consideration of the capital gains tax and stamp duty implications of such a declaration should be taken into account.
It is also possible to sever a joint tenancy and alter it to a tenancy in common. Again, advice about the tax and stamp duty consequences should be sought before altering the way a property is owned. By rebutting the presumption or severing the joint tenancy, your interest in the asset will then form part of your estate and can be distributed through your will.
Case study
When Sandra's husband Doug left her and moved out of the family home, she immediately decided to change her will to exclude Doug from any benefit from her estate. She visited her lawyer and gave instructions to prepare a will leaving everything to their adult daughters. Sandra told her lawyer that she wanted to protect her interest in the family home for the girls. Sandra also communicated her objectives to her daughters. Unfortunately, Sandra died shortly after signing her will. Both daughters were surprised when they received a telephone call from the lawyer advising that a title search had revealed that the family home was owned jointly by Sandra and Doug, and therefore passes to Doug by way of survivorship. The girls get nothing.
Dealing with the succession of non-estate assets
A will can't dispose of non-estate assets; the succession of non-estate assets is dealt with elsewhere throughout this book. You should refer to the following:
For trusts created during your lifetime, such as family trusts and hybrid/unit trusts, refer to
chapters 9
and
10
.
For testamentary trusts, refer to
chapter 11
.
For superannuation, refer to
chapter 15
.
For life insurance, refer to
chapter 19
.
For account-based pensions or annuities, refer to
chapter 15
.
For business interests, refer to
chapter 18
.
Chapter summary
Before a will or other estate-planning documents are prepared, the assets to which they relate must be identified. The effectiveness of the estate plan relies on this step. Where the existence of non-estate assets is also identified, additional planning is necessary to ensure their smooth succession. The following chapter discusses the implications of intestacy, or dying without a will.
Chapter 3Intestacy
My advice is to never do tomorrow what you can do today.
Charles Dickens
One of the essential ingredients of an estate plan is a will. While most people would agree that leaving a will is a good idea, many Australian adults die without a will or without a will that effectively and completely disposes of their estate. This is known as intestacy, and is usually the result of a lack of planning.
Common reasons for not preparing a will
People have many reasons for not preparing a will. These reasons are rarely sound; typical justifications include the following:
‘If I make a will I am more likely to die sooner’
‘I don't own sufficient assets to justify a will’
‘What happens after my death is not my problem — I am dead’
‘I am too busy to think about it at the moment; I will get to it at some stage’
‘I might get it wrong and disappoint those left behind’
‘I will do to it when I'm older.’
Whatever the reason, dying without a will brings with it a range of problems.
Where there is no will, or where the will fails to completely dispose of the estate, there is either an intestacy (a complete failure to distribute the estate) or a partial intestacy (part of the estate is not distributed).
Where a whole or partial intestacy occurs, your assets are disposed of according to a formula set out in an act of parliament. Each state and territory of Australia has a different intestacy regime.
How does intestacy occur?
An intestate estate may be caused by the following:
failure to prepare a will
invalidity of a will because it does not comply with the legal requirements for its preparation (see
chapter 4
)
invalidity of a will because it was the result of undue influence or fraud (see
chapter 8
)
invalidity of a will because it was signed by a will maker who lacked testamentary capacity (explained later in this chapter)
a failure to locate the whereabouts of the original will (see
chapter 7
)
the preparation of a will that is not flexible enough to cater for a change in circumstances, such as the death of a beneficiary or a significant change in the nature and value of assets.
Unwanted consequences of intestacy
There are a range of undesirable consequences that result from an intestacy. Not only do these consequences create uncertainty during the administration of the estate, they can create disputes between family members and bring about inequitable distributions. The following are some of the most common problems.
Intestacy rules are inflexible
A distribution on intestacy means that you lose the ability to determine how and to whom your estate is distributed. In each state and territory of Australia, the intestacy provisions are set out in legislation, which provides the manner of distribution. There is no discretion to vary the distribution. If you rely on the intestacy formula to distribute your estate, you are delegating decisions regarding distribution to the government without regard to the specific circumstances of yourself or your family.
A common myth relating to intestacy is that if you die without a will, the government is the recipient of your entire estate. This is incorrect. An estate will only be paid to the government where there is no identifiable next of kin.
Unintended distribution of personal chattels and heirlooms
The intestacy formula does not differentiate between assets. This means that heirlooms and items of sentimental significance may not be distributed to your intended recipients. The obvious consequence of this is family tension and dispute. Not only can this delay the finalisation of the estate, but such disputes are costly. There are many examples of disputing families spending substantial sums on legal fees arguing over a candelabra or a grandfather clock.
Absence of appointed executor
The failure to prepare a will also means that you will not have appointed an executor to take responsibility for the administration of your estate. In this case, no-one has the immediate authority to commence the administration of the estate until an application has been made to the court for the appointment of an administrator of the intestate estate. As a result, the estate will remain unadministered until such time as an administrator is appointed (refer to chapter 5). This will cause unnecessary delay and may also lead to a dispute about who should be appointed as the administrator.
Unintended recipient
If your estate is distributed according to the intestacy rules, an unintended person may benefit from your estate. Consider the following examples.
Case study
Approximately three years ago, Jolene separated from her husband Dale. Although both Jolene and Dale had finalised their family law property settlement, neither filed for divorce, so they are still legally married. They have two children aged seven and five. Jolene had been intending to prepare a will leaving her estate to her children equally. She had even spoken briefly with her lawyer about making an appointment to discuss her wishes. Before she had a chance to make an appointment and without warning, Jolene suffered a fatal heart attack. Her estranged husband Dale will now benefit from Jolene's $100 000 life-insurance policy, which was paid to her estate.
Case study
Mike and Carol have been married for 10 years. They have both been married before and have children from their previous relationships. Unfortunately, there has been considerable tension between Carol and Mike's three sons from his first marriage. Mike's major asset is the house in which they live. Apart from a small cash investment, Carol has no significant assets of her own. Mike has found it difficult to work out how to distribute his estate between Carol and his sons and consequently has not yet prepared a will. While on holidays, Mike suffers an aneurysm and dies almost immediately. On the intestacy provisions, Carol is only entitled to part of the value of the estate, with Mike's sons being entitled to a portion of the balance. The home in which Carol lives is worth more than she is entitled to on the intestacy formula. This means that the family home now has to be sold, and Carol must find alternative accommodation.
Failure to deal with succession of non-estate assets
Estate planning must deal with the distribution of assets that you control, as well as the assets that you own personally. This is discussed in chapter 2. In some cases, these control issues can be dealt with in the will. For example, the will may nominate a replacement appointor for your family trust. The absence of a will may result in the failure to adequately deal with these control issues.
Further, there will be no means of adjusting the distribution of the estate to take into account benefits received by a beneficiary from non-estate assets, such as superannuation and family trusts. For a discussion of adjusting beneficiary entitlements, refer to chapter 6.
