Beware the trap in joint assets
Just when you think you’ve got all your assets under control and you know exactly what will happen to your estate when you die, there will always be a complication you hadn’t considered.
Take for instance assets you own as a joint tenant. This means you own a property equally with someone else – usually your spouse or partner.
Tony Mitchell of Stacks Law Firm says it doesn’t matter to whom you’ve left your share of the joint tenancy in your will – if you die first then assets you own as a joint tenant will pass to the surviving joint tenant, and will not become part of your estate to include in your will.
In other words your children could miss out on inheriting your half of the house as it will go to the surviving joint tenant. That person could be a new spouse with their own children to look after.
“Assets that are owned by a company or trust are not owned by you personally, even if you are able to control the company or trust, for example, if you own all of the shares in a company,” says Mr Mitchell.
Assets that are owned by a company or a trust will not form part of your estate, and cannot be left by you to anybody in your Will.
Assets owned by a trust, including a self managed superannuation fund, are controlled by the trustee of the trust.
It is essential that planning of your estate deals with this so that after you die it passes to the person you wish to control companies and trusts. If you don’t, assets owned by your companies and trusts may not be dealt with in accordance with your wishes. For example:
· If you and your spouse both leave your shares in your family company (or in a company that is the trustee of your family trust) to the survivor, they will be able to do whatever he or she wishes with the assets of the family company or trust.
· If the survivor leaves the shares in your family company (or in the trustee of your family trust) to your children equally, a majority in number of your children may be able to take all of the assets of your family company (or trust) themselves, and exclude your other children from sharing in those assets.