Part of our “Where There’s a Will…” series: Read Part 1: Joint Tenancy and Estate Planning and Part 2: Superannuation and Binding Nominations before continuing with Part 3.
This is the third article in our series detailing steps you can take to reduce, or perhaps entirely prevent, a challenge being made to your estate.
As we have previously discussed, effective estate planning involves understanding the important distinction between “estate” and “non-estate” assets.
What Are Estate and Non-Estate Assets?
One important part of estate planning is understanding which assets form part of your estate and which assets may pass outside it.
Your Will generally deals with assets that you own personally when you die. However, some assets may pass according to other arrangements. For example, jointly owned assets, certain superannuation benefits and assets held through trusts or other structures may not pass under your Will.
The Queensland Government explains that some jointly owned assets, superannuation and life insurance may not form part of a deceased estate. The way an asset is owned and the arrangements governing it can therefore have an important effect on your estate plan.
Given the proliferation of asset-holding strategies, a person’s estate may contain far fewer substantial assets than they expect. Companies, self-managed superannuation funds and discretionary family trusts can all affect how assets are held and dealt with.
Sometimes, the only assets controlled by a person’s Will might end up being the surfboard and fishing rod.
Consider Asset Ownership Before Acquiring Substantial Assets
Before you acquire any substantial asset, careful consideration needs to be given to how you might want that asset dealt with after your death.
Do you want to hold it in your own name or through another structure?
This question can have important consequences for your estate plan. By not owning an asset in your own name, you may reduce the size of the estate that passes under your Will. This can become particularly relevant if you anticipate challenges from disgruntled family members.
However, choosing an ownership structure involves more than simply considering your Will. You should also consider the purpose of the structure and how it may affect your wider financial and legal position.
How Do Trusts and Other Structures Affect Estate Planning?
People may use different structures to hold assets for a range of reasons. These can include asset protection, tax planning, business purposes and estate planning.
For example, a trust is a legal arrangement in which a person or organisation holds property for the benefit of others. The Queensland Public Trustee notes that trusts can serve various purposes, including preserving and protecting assets, tax planning and business purposes. You can learn more about trusts on the Queensland Public Trustee website.
However, establishing or changing a structure can have legal and financial consequences. For example, Queensland Revenue Office guidance confirms that certain transactions involving trusts and Queensland property can attract transfer duty. Queensland Revenue Office guidance on trusts and transfer duty provides further information.
For this reason, you should consider the consequences of an ownership structure before transferring an existing asset or acquiring a new one.
Consider the Bigger Picture
There are often a number of competing issues when deciding how to own an asset. These can range from asset protection and tax to estate planning.
A structure that works well for one purpose may not necessarily achieve your other objectives. Therefore, you should consider how your chosen structure fits within your broader estate plan.
It is also important to consider how the structure may operate after your death. The Queensland Public Trustee notes that assets held in trusts may need to continue to be managed after a person’s death, depending on the circumstances. Queensland Public Trustee guidance on administering deceased estates provides further information about identifying and managing assets and liabilities.
Plan for the Future
It can be costly to “unwind” structures once they have been established. Therefore, it is important to deal with the “now” while also keeping one eye on the horizon.
Before acquiring substantial assets, consider how you want them to be owned and how that ownership may affect your estate plan in the future.
Taking this approach can help you make informed decisions about your assets rather than having to restructure your affairs later.
Get Advice About Your Estate Plan
Estate planning involves more than preparing a Will. The way you own your assets can also affect how those assets are dealt with after your death.
Our experienced lawyers can help you consider your asset ownership arrangements and how they fit within your broader estate planning strategy.
If you are considering acquiring a substantial asset, establishing a trust or reviewing your existing estate plan, contact us today to discuss your circumstances.
Read the series:
- Where There’s a Will… (Part 1): Joint Tenancy and Estate Planning
- Where There’s a Will… (Part 2): Superannuation and Binding Nominations
- Where There’s a Will… (Part 3): Asset Ownership and Estate Planning