Property you cannot give by Will

You may be surprised to learn that not all property can be given in a Will! We have prepared a list of property that may be excluded from your estate so that next time when you plan changes to your Will or want to draft a new one, ask your lawyer about it!

(a)       Jointly held property. This passes automatically to the surviving joint owner (or owners) on the death of the first dying joint owner — it does not form part of the estate of the first person dying. (If you own property with another person you may hold it either as ‘joint tenants’ or as ‘tenants in common’. It is easy to confuse the two, and it is important to be sure what type of tenancy you have in the property. Joint tenancy and tenancy in common are described more fully below.)

(b)       Property held in trust. This passes to or is held for the beneficiaries of the trust according to the terms of the trust.

(c)        Shares. Certain shares in private companies cannot be given by Will.

(d)       Partnership property. Your interest in partnership property may be given by Will, although partnership property itself cannot be given by Will.

(e)        Superannuation. Your superannuation arrangements may not entitle you to dispose of your superannuation assets by your Will. The rules differ from scheme to scheme — you should discuss the matter with the administrators of your superannuation fund.

(f)         Proceeds of life insurance policies. If the owner of the policy has nominated a beneficiary of the policy, the nomination takes precedence over the terms of the Will. It follows that, where a nomination is made, the proceeds of the policy do not form part of the estate. If you wish the proceeds of the policy to go to someone other than the nominee, you cannot do it by Will: you must change the nomination. If you are not sure whether you nominated a beneficiary, or who you nominated, consult the insurance company concerned.

(g)       Capital guarantee deposits. Some capital guarantee deposits where a beneficiary is nominated (for example, with friendly societies, and some banks) cannot be given by Will.

(h)        Property sold but not yet transferred. Property you have contracted to sell, but not yet transferred, cannot be given by Will.

(i)         Property subject to a contract to leave by Will. Property you have contracted to leave by Will, and property subject to a mutual Wills agreement, generally cannot be given by Will, but the question is complicated and good legal advice is required.

Joint tenancy and tenancy in common

Joint tenancy. Joint tenancy is a form of co-ownership in which the following principles apply:

(a)       There are no shares. In theory each joint tenant has the whole of the property. No party has a specific share in the property while the joint tenancy continues. This means that the joint tenants must have equal interests in the property, and are entitled equally to its rents and profits. There can be two or more joint tenants.

(b)       The principle of ‘survivorship’ applies. On the death of one joint tenant the surviving joint tenant gets (or joint tenants get) the whole property automatically by operation of law, irrespective of any Will made by the joint tenant who died, and irrespective of the intestacy rules. This is the principle of ‘survivorship’, which applies to joint tenancies. This gives considerable protection to a joint tenant.

It follows that property held in joint tenancy does not form part of the estate of a joint tenant who dies. This is important when deciding whether a grant of probate is needed. A grant of probate is required if the estate contains land (except in Queensland) — but this does not include property held in joint tenancy, as it does not form part of the estate. The property passes automatically, by operation of law, to the survivor or survivors without forming part of the estate of the first-dying. A grant of probate is therefore not required for transfer (to the other joint tenant or tenants) of property held by the deceased as a joint tenant. Further, a joint tenant cannot by her or his Will deal with property held in joint tenancy, because the property goes automatically to the other joint tenant on the death of the testator.

(c)        The principle of joint tenancy applies to real as well as personal property — it applies to land as well as to property like cars, shares, furniture and bank accounts.

(d)       Joint tenancy is usual in marriage where the spouses want to hold the property equally and want the principle of survivorship to apply. It is not common in other situations. It would be somewhat unusual for a partner to a domestic partnership or personal relationship or even a marriage who buys a house using only her or his own money or who has contributed much more to the purchase price than the other partner to want to register the house in joint names where the interests must be equal and the purchaser cannot deal with the property by Will.

(e)        It is possible for a joint tenant to sever a joint tenancy.

Tenancy in common. Tenancy in common is a form of co-ownership in which property is held in common with others but where, in contrast with joint tenants, the share of a deceased tenant in common passes to her or his beneficiaries under her or his Will or intestacy and does not automatically pass to the surviving tenant or tenants in common.

(a)       Tenants in common have fixed, undivided shares in the property. Tenants in common can have unequal shares (for example, two-thirds to one and one-third to the other).

(b)       The share belonging to a tenant in common becomes part of the estate of that tenant in common when he or she dies; that is, a testator who is a tenant in common can leave her or his share by Will or, if there is no Will, the intestacy rules apply to the share that belonged to the tenant in common. (There is no principle of survivorship for tenants in common.)

(c)        Tenancy in common is usual where two people purchase a property together, especially where they have contributed unequally to the purchase price: the parties can own equal or unequal shares to reflect their respective contributions, and each can deal with her or his share by Will. A husband and wife who purchase a property together out of what they see as the assets of the marriage often purchase as joint tenants, but if they are in a blended family it may be more appropriate to purchase the property as tenants in common.

In Wills, the standard form of gift, for example of residue or the estate, to the testator’s children is to the children as tenants in common.