I was recently interviewed by Jemma Pearson of My Property Preview where she published an article entitled “Get it Write”.
The article highlights the importance of reviewing your Wills when you purchase or sell property. I have highlighted in this post some of the important issues covered in the article.
Mortgages on Property
It is important to take into account whether or not properties that you own have mortgages on them, and how those mortgages will be paid out, upon your death. If a beneficiary is unable to service the debt they may need to sell the property. I therefore recommend that property owners always obtain sufficient life insurance to ensure that all debts of the estate are paid out, and the beneficiaries are not burdened with inherited debt.
Capital Gains Tax
A principal place of residence of a deceased will be capital gains tax free if it is transferred within 2 years from the date of death. Capital gains tax will apply after that date. Capital gains tax for investment properties is treated differently. The Australian Taxation Office has some helpful information in relation to this.
Under age beneficiaries
Children under the age of 18 are entitled to inherit property, however the property will be held on trust for them until they turn 18. Most people will nominate a guardian to take care of their children. A well structured Will should have provision to entitle the guardian to apply to the Executor for sufficient funds for the care, education, support and maintenance of the children until they turn 18.
Property owned as Joint Tenants
It is also very important to consider how properties are owned, as this will impact on the way properties can be dealt with in a Will. If a property is owned as joint tenants, it means that the deceased share in the property is automatically transferred to the surviving person. This means that particular property cannot be dealt with in the Will.
Property owned as Tenants in Common
If a property is owned as Tenants in Common, then the deceased’s share will be distributed in accordance their Will, as that portion of the property forms part of the pool of assets of their estate.
Property owned by a Company or Trust
As companies and trusts do not die, property owned in those vehicles will not form part of the estate. It is therefore important to consider who owns the shares in a company, or who has the controlling position of a trust. The effective control of the company or trust can therefore be passed over in accordance with the provisions of your Will.
Property owned in a Self Managed Superannuation Fund
Property owned in self managed superannuation funds is also dealt with differently. The control of the self managed superannuation fund needs to be carefully considered when reviewing your Will.
Marriage or Divorce
It is imperative that couples who are going through a separation, or are about to get married, review their Wills as these events can invalidate certain aspects of your Will. Specific advice from your solicitor is required in these circumstances, as each case may differ.
As stated by Jemma Pearson “adequate estate planning will ensure your loved ones will be looked after in accordance with your wishes when you are no longer around.” It is therefore important that you contact your solicitor when buying or selling your property, to ensure that your Will is up to date. Please contact me if you have any questions regarding your Will.