Asset Ownership
Joint Tenancy
Where two or more people jointly own an asset. Upon the death of a joint tenant all the interests in the asset automatically pass to the surviving tenant. Generally these assets are protected from any challenges to the Will. In NSW joint tenant assets could form part of the estate if declared 'notional assets'.
Severing Joint Tenancy
A joint tenancy arrangement could be severed and converted to a tenants-in-common structure. This would cause the assets to pass into the estate which could avoid them going to an ex-spouse for example. However this could be challenged. Changing from joint tenancy to tenants-in-common does not normally trigger a CGT event. In addition stamp duty is not payable in most States if the tenants-in-common are held in equal shares. However if held in unequal shares it may be payable.
Tenants-in-Common
This where two or more people own seperate interests in an asset. Each tenant is able to sell or dispose of their share of the asset and direct their interest under their Will. Unlike Joint Tenancy if one owner dies, the surviving owner/s does not automatically become the new owner of the asset and their share of the asset can pass to the estate.
Property title deeds normally state the ownership arrangement eg. co- or jointly owned. In NSW if the contract does not detail how the asset is owned then it is automatically deemed to be tenants-in-common.
Companies
Assets of a company cannot be passed to beneficiaries. Shareholdings can be passed on under the Will. If the shares are jointly owned they will bypass the estate and go directly to the surviving owner.
Trusts
An arrangement made whereby a Trustee holds assets for the benefit of another person/s, otherwise known as beneficiaries. Upon death the assets will be dealt with according to the terms of the Trust Deed not the Will.
Testamentary Trusts
Trusts established under the terms of a Will and only take effect after the person has died and probate granted.
Estate Equalisation
Ensuring the beneficiaries receive an equal share of the estate.
Life Insurance
Can be used to support the estate in many ways such as covering funeral expenses, ongoing educational costs for children etc. Can be effective for replacing income in the short to medium term until the surviving spouse returns to work; effective for covering tax liabilities from the estate proceeds. Life insurance can also be used to cover CGT liabilities and to pay for outstanding debts attached to estate assets.
The other major benefit is that life insurance bypasses the estate and goes directly to a specific person, except for self-owned policies without a nominated beneficiary. This ensures the proceeds are not subject to challenges under the Family Provision Act 1982 (NSW).