Burning Question: Family and Wills - The Separated Saver who wants to Protect her daughters Inheritance.
"I have a burning question regarding family law and wills.
My daughter has had relationship issues with her husband for a couple of years and they now live separately but still under the same roof.
They have one daughter.
My daughter is a saver and has paid off the mortgage on their house. Her husband is a spender who always runs up debt on his credit card, paying huge interest rates. At least that card is in his name and my daughter has nothing to do with that credit card. She refuses to 'rescue' him. She had done in the past - years ago.
My daughter is writing a will and wants to leave her estate to her daughter. Her estate is her superannuation and her bank account, which is in just her name. The house is in both names as joint tenants.
My daughter is concerned that if anything happens to her, her husband will have her half share of the house as well as his own. She has no confidence that he will look out for their daughter. She is investigating redoing the titles of the house as tenants in common and that way she can will her half to her daughter but this may lead to other issues.
She has come to me for advice and I don't know how to advise her. Can you help?"
To clarify, this should not be taken as legal advice, but rather, general discussion of issues that you may wish to research further.
Firstly, it is good that your daughter is considering changing the ownership status on the title. This will prevent her share of the house automatically passing to her husband on her death. Only by severing the ‘joint tenancy’ and reverting to ‘tenants in common’ will she be able to leave her share to her daughter.
Severing the joint tenancy is a relatively straightforward and inexpensive process. Your daughter will be able to contact the Land Titles Department in the appropriate state or territory. The Land Titles Office will be able to give your daughter an idea of the cost involved, which is nominal I believe, and advise the appropriate forms that need to be completed to sever the joint tenancy which are to be lodged at the Lands Office.
She may also wish to consider other strategies such as placing her share of the property in a trust for her daughter.
It is wise that your daughter is being pro-active about protecting her child’s financial interests.
If she has not already done so, she should enquire with her super fund trustee about nominating her daughter as the beneficiary of her superannuation account. This will ensure that her daughter is automatically entitled to those funds. The superannuation trustee will guide her to the appropriate forms to make this nomination.
Alternatively, she can bequeath her superannuation to her daughter via her Will. However, consider that there are state laws that enable a Will to be challenged by certain eligible persons classed as ‘dependents’ if adequate provision has not been made for them. Whilst not every challenge is successful, to avoid this possibility, the best option may be directly nominating beneficiary with the super fund trustee.
Considering the large amount of debt that has been incurred by the husband, your daughter should consider putting a property settlement in place to safeguard her share of assets from any potential creditors of the husband.
A property settlement will define the rights of each party in relation to the assets and liabilities, and can be finalised by way of Consent Orders or Binding Financial Agreement.
It sounds like you are already quite knowledgeable about the various issues that may impact on your daughter, and I hope this helps you define further steps to take to maximise your daughter’s and granddaughter’s financial security.
Thank you for your question and we wish you and your family all the best.
The RP Emery Team
By Ian MacLeod