There are a range of assets which do not automatically form part of a deceased estate.
It is important for prospective testators, executors and beneficiaries to be aware of these types of assets.
In this article we consider a range of these assets, including joint tenancy assets, superannuation death benefits and life insurance.
Joint tenancy assets
Joint tenancy is a form property interest in which each party to the joint tenancy owns the whole of the asset together.
Common examples of joint tenancy assets include real property and bank accounts.
The effect of joint tenancy ownership in assets is particularly important to understand in the context of estate planning in administration.
This is because, upon the death of a joint tenant, the remaining joint tenant/s will inherit the deceased party’s share of the relevant asset automatically.
Accordingly, joint tenancy assets do not form part of the asset pool constituting a deceased person’s estate.
Joint tenancy interests can be contrasted against circumstances whereby assets are held as a tenant in common. Tenancy in common assets prescribe a identifiable share of the asset to a relevant party/s, which does not automatically pass to the other tenant/s in common on death of the holder that interest.
Superannuation death benefits
Superannuation death benefits do not automatically form part of a deceased estate.
Superannuation death benefits will generally only form part of a deceased estate if:
- the trustee of the relevant fund exercises their discretion to pay to the estate; or
- the estate is the pre-determined recipient of such benefits (via binding nomination or trust deed operation).
In practical terms, it is often the case that superannuation death benefits will pass to a dependant spouse or children and accordingly not form part of the assets comprising the deceased’s estate.
Life Insurance
In determining who benefits from a life insurance policy regard must be had to the ownership of the policy and the named beneficiary/s under same.
Often life insurance policies are paid directly to beneficiaries such as a spouse or family member, and in such circumstances, these assets will not form part of a deceased estate.
In the event that a testator wishes for the proceeds of a life insurance policy to pass to their estate as beneficiary, their estate will need to appropriately nominated under the terms of the policy.
Points to take away
Not all categories of asset will automatically form part of a deceased person’s estate.
Having an understanding of the types of assets which are commonly excluded from consideration is important when preparing a will, conducting estate planning, and administering a deceased estate.
It will often be prudent, when engaging in these activities, to receive appropriate legal advice in order to ensure that a party’s intentions, interests and obligations are properly taken into consideration and met as applicable.
