Introduction
For most people, asset protection is crucial. It is important to ensure that those people who are to inherit certain assets end up actually receiving those assets as intended. Similarly, it is important to safeguard your assets from the risk of assets passing to those persons when you do not want to receive any benefit. Fortunately, there are a range of options available to you to assist in protecting your assets after you die.
Joint ownership
If you hold assets in joint names with another person, upon your death, those assets will automatically pass to the other person, regardless of what is in your Will. This is a sure-fire way to protect those particular assets, as they cannot be challenged.
Transferring assets during your life
If you transfer your personal assets to your friends and family members prior to your death, then by the time your Will is to be administered, the assets will not form part of your estate, and thus will protect those particular assets from a potential Will challenge.
A trust during your life
Quarantining your assets into a trust and giving yourself a life interest over those assets can be an effective strategy to protect your assets. This means that you are able to use those assets during your lifetime but those assets are immune from any challenges, as you do not actually own those assets. The beneficiaries of the trust would be the persons to whom you wish to gift your assets.
When setting up such a trust, it is important to consider that it can be expensive if you are transferring real estate and other investments which attract a transfer duty. There can be capital gains tax consequences as well.
Testamentary Trust
On top of being an effective tax planning tool, Testamentary Trust Wills are also an effective asset protection tool.
After you die, your executor will hold your assets for distribution in various trusts for the benefit of each of your beneficiaries. Your assets will not actually pass into the hands of your beneficiaries. This protects the assets from creditors or other parties who may seek a portion of a beneficiary's inheritance, for example, troublesome partners or spouses or creditors.
Mutual Wills
Mutual Wills can be an effective asset protection tool where two people are making their Wills concurrently. Mutual Wills form a legally binding contract which prohibits either party from amending or revoking their Will, without the consent of the other person. If one party dies, both Wills are irrevocable and cannot be amended.
For example, a couple who have both remarried want to leave their entire estate to each other, and then, after both have died, then equally to their children. The Wills are drafted with the same terms and both enter into a deed, leaving their estate to each other. Upon the death of one of them, the survivor would be required to leave the estate to their children. The agreement also prevents the Wills from being changed without their mutual agreement. Accordingly, once one of the couple dies, the survivor is no longer free to make a new Will and any challenges would be defeated.
Binding Death Benefit Nomination
Superannuation, as a general rule, does not form part of your estate. If no Binding Death Benefit Nomination has been made, then the trustee of the superannuation fund will have the power to decide to whom the death benefit should be paid, subject to the terms of the superfund trust deed.
By completing a Binding Death Benefit Nomination, you can be certain that the person whom you have nominated will receive payment of any death benefits.
If you require expert legal advice about how to protect your assets after your death, please feel free to contact our Accredited Specialist Wills & Estates Law team on 1300 205 506 or complete the form below.
The information contained in this article is intended to be of a general nature only and should not be relied upon as legal advice. Any legal matters should be discussed specifically with one of our lawyers.
Liability limited by a scheme approved under Professional Standards Legislation.
Binay Prasad is a Senior Associate of Sharrock Pitman Legal and an Accredited Specialist in Wills and Estates law.
Binay has over 10 years of experience in the field of wills and estates and has a particular interest in complex estates involving business, family trusts, and SMSFs. Binay also has experience in family law, which complements his wills and estates practice. For further information, contact Binay on his direct line (03) 8561 3329 or by email, binay@sharrockpitman.com.au.
