An Estate Planning Horror Story
Priya is a single mum and meets Theo. They buy a house together using their savings. Sometime later, Priya passes away.
In scenario 1, Priya dies without a will and the house goes to Theo because it was bought as joint tenants. Priya's child gets some superannuation and not much else. This is not what Priya wanted.
In scenario 2, Priya writes a will leaving her assets equally to her child and Theo. Unfortunately, as Priya has used her life savings to buy the house with Theo and the house is bought as joint tenants. Joint tenants means that the survivor of the tenancy takes the asset. So, Theo gets the house and then Priya's child and Theo get half of what is left which, unfortunately means that the child gets half of some superannuation and not much else while Theo gets the house, half of the superannuation and the other half of not much. This is not at all what Priya had wanted.
In Scenario 3, Priya and Theo buy the house as tenants in common and Priya creates a will that leaves her share of the house to her child which he can have when he reaches 25. At 25, the child takes his inheritance and promptly loses 50% of it to his girlfriend of 7 years from whom he has recently separated. This is also not what Priya wanted.
How can she be certain that her legacy benefits her child and only him? Priya can future plan. She can plan to leave Theo some superannuation as he is an eligible beneficiary. She can own the house as tenants in common with Theo so that when she dies, her share of the house remains in her estate. Priya's Will can leave her share of the house to her child in the protective structure of a testamentary trust. The Will can detail the terms of the testamentary trust to allow Priya's child to receive care and education from the trust until 25yo and then protects the assets so that only the child and his children can benefit.