How is the property of a deceased person distributed outside a will?
The property of a deceased person can be distributed in a number of ways. If the deceased person had a Will, then generally their property will be distributed in accordance with the Will. A Will is a written document that outlines what happens to your property after your death. However, some assets do not fall into the estate and are outside the scope of the Will. You must take great care when planning the distribution of your estate to ensure that you give careful consideration to all your property, including property that will fall outside your estate.
Jointly Held Property:
Property that more than one person owns is considered to be jointly held, this may be in the form of a Joint Tenancy or as a Tenancy in Common.
Joint tenancy means that each joint owner is entitled to the whole property, rather than having a specific share. Thus, each joint owner must have equal interests in the property and are entitled to its rents and profits equally. Where property is jointly owned, the property automatically passes to the surviving joint owner on the death of the first dying joint owner, as per the principle of ‘’survivorship.’’ As a result of this, the property does not form part of the estate for the first dying joint owner and, therefore, a Grant of Probate is not required. Accordingly, a property that is owned by joint tenants cannot form part of a deceased estate.
Joint Tenancy is most common for married couples who want to hold property equally in both their names.
Tenant in Common:
In contrast to Joint Tenancy, Tenants in Common have a specific fixed share in the property, which has the ability to be unequal. There is no principle of survivorship, thus unlike Joint Tenants, the fixed share of the deceased Tenant in Common does not pass on to their co-owner but to their estate by Will.
Tenancy in common frequently occurs between unrelated parties as it allows each tenant to pass on their share of the property to their own families or beneficiaries.
Property held in Trust:
Property that is held in Trust is passed to the beneficiaries of the trust according to the individual terms of that trust.
Certain shares in private companies cannot be transferred by Will, however, some Wills may specifically instruct the executor to sell or gift the shares to a beneficiary.
Partnership Property consists of all the property contributed by the partners or acquired for the partnership as a part of a joint venture.
A person’s interest in a partnership property may be transferred by Will.
Superannuation arrangements vary from scheme to scheme, however, under law superannuation is not considered to be an asset, meaning it can not form part of a person’s estate. Such assets sit separate and apart and are dealt with by the trustee of the superannuation fund in accordance with the powers enjoyed by the trustee under the trust deed and at law.
Instead, some arrangements allow for superannuation funds to be held in trust and thus may be managed by the trustee of the superannuation. It is only the trustee who has permission to distribute funds as per the person’s request.
It is essential that you constantly monitor your Superannuation Binding Death Benefit Nominations to ensure they are always valid and reflect your intentions. You should liaise with your fund manager or superannuation advisor to understand your position.
Life Insurance Policies:
If a person has nominated a beneficiary for a Life Insurance Policy, the nomination will take precedence over Will arrangements. As such, entitlements under various provisions of life insurance policies can be subject to you nominating to whom payments are to be made upon your death and such assets do not always form part of your estate and cannot, therefore, be gifted through your will. That is, they can be assets that sit outside the operation of your will.
It is important that you discuss the operation of such matters with your insurance broker or agent to ensure that, upon your death, such payment goes where you wish them to go.
ASAP Lawyers can assist you with your estate planning matters. Contact us on 03 9450 9400 to speak with a member of our team.
Our lawyers are able to:
Review and update your current Will;
Advise you on any queries or concerns you have about your Will;
Draft you a new Will; and
Advise you on your binding death nomination.