Introduction

Many people believe that a will controls the distribution of all their assets, but this is a common and potentially costly misunderstanding in estate planning. Significant assets, such as property owned as joint tenants and superannuation funds, often fall outside the direct control of a will and are not automatically included in a person’s deceased estate.

This separation can lead to unintended consequences where a superannuation death benefit or property share is transferred to a person other than the intended beneficiary. This guide explains how these assets are treated upon death and outlines the essential strategies, such as binding death benefit nominations, needed to ensure your estate is distributed according to your wishes.

Distinguishing Between Estate & Non-Estate Assets

What Your Will Can & Cannot Control

A will is a powerful legal document, but it only governs the distribution of assets that you own in your sole name. These “estate assets” can include:

• Bank accounts
• Shares
• Real estate held solely by you

Your will provides instructions to your executor on how to distribute this property to your chosen beneficiaries after your death.

However, many common and valuable assets are not controlled by the terms of your will because they are not considered part of your deceased estate. These “non-estate assets” are distributed automatically or at the discretion of a third party, such as a trustee, based on different legal rules.

Understanding this distinction is fundamental to effective estate planning, as it ensures your assets will be distributed according to your wishes.

Common Examples of Non-Estate Assets

Several types of assets typically bypass your will and are not distributed according to its terms. It is crucial to recognise these to ensure your estate planning goals are met.

Asset Type	Reason it is a Non-Estate Asset
Jointly Owned Property	The “right of survivorship” applies, meaning the deceased’s share automatically transfers to the surviving joint owner, bypassing the will. This often includes the family home, joint bank accounts, and shares.
Superannuation	Held in a trust, its distribution is determined by the fund’s trustee, who must follow a valid binding death benefit nomination or use their discretion to pay eligible dependants. It is not part of the deceased estate.
Life Insurance Policies	Proceeds are typically paid directly to the nominated beneficiary of the policy. These funds are not controlled by the will unless the estate itself is nominated as the beneficiary.
Assets in a Family Trust	These assets are owned by the trust, not the individual. Control of the trust is transferred according to the trust deed, not the terms of the will.

The Impact of Jointly Owned Property on Your Estate

Understanding Joint Tenants & The Right of Survivorship

When two or more people own property as joint tenants, they each hold an equal and unified interest in the entire asset. This form of co-ownership includes a critical feature known as the “right of survivorship.”

The right of survivorship means that when one joint tenant dies, their interest in the property automatically transfers to the surviving joint tenant or tenants. This process occurs by operation of law, completely bypassing:

• The deceased person’s will
• Their deceased estate

Consequently, you cannot use your will to gift your share of a jointly owned property to a beneficiary, which is one of the common mistakes you’ll make when drafting your own will.

To illustrate this concept, consider a case where a couple owns their family home as joint tenants. If one spouse passes away, the surviving spouse becomes the sole owner of the property, regardless of what the deceased’s will might state. The property does not form part of the deceased estate for distribution to beneficiaries.

How a Tenant in Common Share Forms Part of a Deceased Estate

In contrast to a joint tenancy, owning property as tenants in common means each co-owner holds a distinct and separate share. These shares can be equal or unequal – for example, one person might own a 70% share while the other owns 30%.

Crucially, the right of survivorship does not apply to tenants in common. When a person who owns a share as a tenant in common dies, their specific portion of the property becomes an asset of their deceased estate. This means the share can be distributed to a beneficiary according to the terms of their will.

This type of ownership provides control over who inherits your share of a property. For instance, siblings who purchase a property together may choose to be tenants in common so that each can leave their respective share to their own children in their will.

Managing Your Superannuation Death Benefit

Why Superannuation Is Separate from Your Will

Many people are surprised to learn that their superannuation is not automatically part of their deceased estate and cannot be gifted through their will. This separation occurs because superannuation is held within a trust structure, with its distribution upon death governed by:

• The rules in the fund’s trust deed
• Relevant superannuation law
• Not the terms of your will

As a non-estate asset, your superannuation death benefit is dealt with separately from assets you own in your sole name. The trustee of your superannuation fund ultimately determines who receives your death benefit—a decision made entirely outside the probate process.

The Role of the Superannuation Fund Trustee

The trustee of the superannuation fund plays a crucial role in distributing a member’s death benefit. If a deceased person has not made a valid binding death benefit nomination, the trustee has the discretion to decide which dependant or dependants will receive the payment.

This decision-making process operates independently of:

• The deceased’s will
• The executor’s wishes

The trustee may choose to:

• Pay the benefit directly to eligible dependants, such as a spouse or child
• Pay it to the deceased estate to be distributed by the executor

This highlights why a superannuation death benefit requires specific planning separate from your will. Without proper arrangements, the distribution of your super may not align with your broader estate planning intentions.

Strategies for Your Estate Planning Lawyer to Implement

Using a Binding Death Benefit Nomination for Your Superannuation

A Binding Death Benefit Nomination (BDBN) is a written direction you provide to your superannuation fund, instructing the trustee on who should receive your superannuation death benefit. This legal document offers several important advantages:

Advantage	Explanation
Provides Certainty	The superannuation fund trustee is legally required to follow the instructions in a valid BDBN.
Ensures Wishes are Followed	It guarantees that your superannuation is distributed according to your specific directions.
Removes Trustee Discretion	It eliminates the trustee’s ability to decide who receives your death benefit, preventing potential disputes.

It is crucial to keep these nominations current. Many binding nominations are lapsing, which means they expire after a set period, typically three years. If a nomination lapses, it may become non-binding, and the trustee will regain discretion over who receives your death benefit.

An estate planning lawyer can help you ensure your BDBN remains valid and up-to-date, protecting your intentions for your superannuation assets.

Directing Your Superannuation to Your Deceased Estate

One strategic option is to use a BDBN to direct your superannuation death benefit to your Legal Personal Representative (LPR), who is the executor of your will. This approach creates a specific pathway for your superannuation:

1. When you nominate your LPR, your superannuation becomes an asset of your deceased estate upon your death
2. The executor will then distribute these funds according to the instructions laid out in your will

This approach is particularly useful if you wish for your superannuation to go to a beneficiary who is not considered a “dependant” under superannuation law, such as a parent, sibling, or friend. Since only dependants can receive a superannuation payment directly from the fund, directing the benefit to your deceased estate is the necessary step to ensure non-dependants can inherit these funds through your will.

Potential Pitfalls & Complications for Your Executor

Misinterpreting Asset Ownership

An executor can face significant challenges if they misinterpret how an asset is owned. Confusion between different types of ownership can lead to serious administrative errors.

Common misinterpretations include:

• Incorrectly including a joint asset in the deceased estate
• Excluding a tenant in common share that should be part of the will

To avoid these issues, it is crucial to check the property title or other official documentation to confirm the exact nature of ownership before administering the estate.

Disputes Among Beneficiaries & Surviving Co-owners

Conflicts can easily arise when assets are co-owned or when superannuation death benefits aren’t clearly directed. These disputes typically manifest in two main scenarios:

Area of Dispute	Common Conflict Example
Property Co-ownership	A surviving co-owner may resist the estate’s involvement, leading to friction over the sale of the deceased’s share or potential buyout arrangements.
Superannuation Benefits	Conflicts often arise when a binding nomination is absent. A trustee might pay the death benefit to a new spouse, contrary to the will’s intention to leave the entire estate to children, causing disputes between beneficiaries that may require legal action to contest the will.

Conclusion

Understanding that your will does not control jointly owned property or your superannuation death benefit is crucial for effective estate planning. By using tools like BDBNs and correctly structuring asset ownership, you can ensure your entire deceased estate is distributed according to your wishes.

To handle these complexities and secure your legacy, contact our experienced estate planning lawyers at PBL Law Group today. Our team provides the trusted expertise needed to ensure your assets are protected and your beneficiaries are provided for exactly as you intend.

Frequently Asked Questions