As we go about our everyday activities we often don't consider what would happen to our assets (our estate) if something was to happen to us. Some of us go as far as having a will prepared however nearly 50% of Australians do not even think to do that. Are you aware that not all assets are dealt with under a will? How they are dealt with depends on a range of different factors. For example:
Did you know that in most cases superannuation is not covered by your will?
Did you know that if you hold property as joint tenants it is dealt with differently than if it is held as tenants in common?
Do you know how your Life Insurance is accessed?
Do you know how joint bank accounts are treated?
Do you have investments in a Trust Structure? Do you know how this is dealt with?
Are there any taxation implications?
An Estate plan identifies your assets and investments and then determines how they are treated if something happens to you. It protects your assets and ensures they are transferred according to your wishes in a smooth and tax effective manner.
The following example may highlight some issues you didn't realise were relevant to you:
Geoff & Joyce were a retired couple. They had worked hard all their lives and accumulated some assets:
- The Family home held in both their names as joint tenants.
- An SMSF in which both Geoff & Joyce had an interest and were drawing account based pensions. Part of the source of the funds in the SMSF was Geoff's inheritance from his parents.
- Geoff had a collection of rare coins, this collection had been acquired out of their joint bank account.
- Both Joyce and Geoff each had small parcels of shares they had acquired over the years in their own names.
- Geoff was in receipt of a defined benefit superannuation pension.
- Term Deposit accounts held in their joint names.
They were concerned after speaking to friends that if one of them passed away and the other remarried that their assets may not be directed to their two children. To ensure that their wishes were carried out they made a will leaving their individual share of the assets to their children in trust for each other.
Geoff passed away unexpectedly and Joyce took his will to a lawyer anticipating that half of each of the assets would be transferred to their children but the income from those assets provided on trust for her and that she would retain ownership of the remaining half of each of the assets.
Imagine Joyce's surprise when her solicitor advised her that the majority of the assets reverted to her automatically and that Geoff's estate consisted of considerably less than they had assumed.
Clearly this had not fulfilled their objectives of safeguarding their assets for their children whilst providing an income for the remaining spouse.
By developing an Estate Plan this would have highlighted any potential issues, providing them the opportunity to address them before it was too late.