Assets owned by a company, family trust or SMSF you control don’t form part of your estate when you die, so your Will can’t deal with them. What your estate planning has to deal with instead is who takes control of each entity and that depends on its own governing document rather than on your Will.
If you have a business, company, family trust or SMSF, estate planning usually includes preparing a written estate plan to help you and your family understand the succession of those entities.
Why can’t your Will deal with them?
Assets owned by another legal entity that you control won’t form part of your estate on your death, so they can’t be dealt with in your Will. Those assets continue to be held for the benefit of the beneficiaries of the trust or the shareholders of the company.
The entity itself continues to exist after your death. What ends is any personal right you had to control it, as trustee or as director. Depending on the terms on which the entity is constituted, you may be able to pass that control on to other people.
There’s no one-size-fits-all. Every entity is governed by its own rules, whether a trust deed or a constitution and they vary significantly. It’s essential to obtain advice about the succession of each entity to ensure they’ll pass in accordance with your wishes.
Companies
Shares you own in a company will usually form part of your estate on your death. The assets owned by the company itself won’t.
It’s essential to make sure your company will be controlled by an appropriate person after you die. There are several ways to do this, depending on the company structure and the terms of the constitution.
Who inherits the shares is decided by your Will. Who becomes a director is decided by the constitution and company law. Those are separate questions and they don’t always produce the same answer.
Where you’re the sole director and sole shareholder, the position is tighter still. Your executor can step in, but where there’s no Will there’s no executor until the Supreme Court appoints an administrator and a trading business may not survive the wait. See 10 reasons why you should make a Will.
Trusts
Assets legally owned by the trustee of a discretionary family trust won’t form part of your estate on your death. As with companies, the task becomes one of passing control of the trust to the relevant person.
It’s essential for your lawyer to review the terms of your trust deed to determine how control can be passed and to make sure the trust will be controlled by the appropriate people.
The role that matters most is often the one people have forgotten they hold. Most deeds give someone the power to appoint and remove the trustee, variously called the appointor, principal or guardian. Whoever holds that role controls the trust. Some deeds name a successor, some let the holder nominate one by Will and some are silent. A thorough estate plan will consider this and make sure control of the trust passes to the appropriate person.
Self-managed super funds
Superannuation death benefits don’t automatically form part of your estate on your death. As part of your estate planning we review your superannuation trust deed to make sure your death benefits will be paid to the appropriate people and that the SMSF will be controlled by appropriate people. Control is essential, because whoever controls the fund is responsible for paying your death benefit. See Estate planning trap no. 1 – superannuation.
Frequently asked questions
Can I leave my family trust to my children in my Will?
No, because you don’t own it. What you may be able to pass on is control of it, but whether you can do this in your Will depends on the trust deed rather than on your Will.
What happens to my business if I die without a Will?
Nobody has authority to deal with your shares until the Supreme Court appoints an administrator. For a business that needs decisions made weekly, that delay can do significant damage.
Do I need to change my trust deed?
Sometimes. Where the deed is silent on succession or names someone who’s no longer appropriate, amending it may be the only way to achieve what you want. We will review your trust deed and let you know if it is suitable or if it needs to be changed.
Is a written estate plan the same as a Will?
No. Your Will deals with what you own personally. A written estate plan explains how everything else fits together, so your family and your advisers can see the whole picture rather than piecing it together after your death.
Estate planning for your entities
Entities can’t be dealt with by a simple Will. We start with an estate planning consultation to work through what you hold and how each entity is governed, then give you a tailored quote for the work.
Contact us for an estate planning consultation or call the Wills team on (08) 9220 4433.
This article is general information and not legal advice.
