Question

A couple has the following assets: Investment property, bank account, term deposit, shares, managed funds and superannuation

1. Advise as to whether the investments are estate or non-estate assets. Should they re-structure such that all the assets are estate assets? why/why not? (max. 200 words)

Answer 1

Why is it important to appreciate the difference between estate and non-estate assets?

• If you do not fully appreciate the difference between estate and non-estate assets, your estate plan may fail to pass ownership of your assets as you intend at the time of your death.
• Estate assets will pass under the terms of your will, but they may include less than you think they do. Non-estate assets pass under a variety of other agreements and arrangements.

Why is it important to create an estate plan?

• A solid estate plan will structure your estate so all of your assets can be distributed according to your wishes.
• Additionally, a good estate plan will protect your family’s interests and minimise the amount of taxes they’ll have to pay.
• To avoide probate - A probate is the process of validating a deceased person's will and placing a value on their assets, paying their final bills and taxes, and distributing the rest to their beneficiaries.
• Avoid mess - Choosing someone to be in charge if you become mentally incapacitated or die—and deciding who will get what, when they will get it, and how they will get it—will go a long way towards avoiding family fights and costly probate court proceedings.

Estate Assets -

• Individual assets are those assets that have your name (and your name only) on the title.
• Assets owned with another as tenants in common are also considered estate assets.
• In the financial and legal sense of the term, an estate refers to everything of value that an individual owns—real estate, art collections, antique items, investments, insurance, Common estate assets include bank accounts, real estate, stocks, bonds, cars and trucks, boats, airplanes, and business interests.and any other assets and entitlements—and is also used as an overarching way to refer to a person's net worth. Legally, a person's estate refers to an individual's total assets, minus any liabilities.

Generally estate assets include -

• Personal property, such as a car or jewellery, of which you are the sole owner;
• Financial assets, like a bank account or shares that you own solely;
• Life insurance policies, but only if your estate is the nominated beneficiary;
• Certain other interests, like partnerships or fixed trusts; and
• Real property owned either solely or as a tenant in common with someone else.

Non-estate Assets -

• Non-estate assets don’t need to go through the probate process after you die because they pass directly to your heirs.
• For example, if you jointly own a bank account with your daughter, it will pass 100% to her after your death.
• Other non-estate assets include assets owned by trusts or companies, life insurance, and jointly owned property.

Non-estate assets generally include -

• Assets owned as joint tenants;
• Assets held in a discretionary family trust or private company in which you have an interest;
• Superannuation;
• Reversionary pensions or annuities; and
• Certain insurance policies where any proceeds are not paid to your executor/estate.

Types of property as asked in the given question -

Property name	Type
Investment property	Estate
bank account	Estate
term deposit	Estate
shares	Estate
managed funds	Estate
superannuation	Non-estate

Should they re-structure such that all the assets are estate assets and why not?

• No, we would not advice the re-structuring of all the assets as estate assets, as non-estate assets don’t need to go through the probate process after you die because they pass directly to your heirs.
• In case of estate assets, one need to ensure creation of will to avoid various issues, as mentioned in points above.