Estate planning is a crucial part of preparing for the future, and one of the key components is considering how any property you own or are paying off should be factored into your Will.
As estate planning lawyers, we frequently help individuals and couples to ensure their home is either retained by the right people or sold so that funds can be distributed in accordance with their wishes after they pass away.
Take a closer look at some important considerations for Australians when it comes to property, mortgages, Wills and estate plans.
Estate planning when you co-own property
Some families find themselves in a situation where a person wants their share of a property to go to one or more individuals other than the co-owner.
The outcome of this situation will depend on whether the owners of the home are recognised as joint tenants or tenants in common.
Usually, if a joint tenant dies, the asset will automatically be transferred in full to the other joint tenant.
If the property was purchased by two people as tenants in common, the surviving person does not necessarily have the right to claim the full value of the home as their own.
If you don’t want your property to go to a joint owner after you pass away, you need to clarify this in your estate planning and work with your lawyer and accountant to make sure you are formally recognised as tenants in common.
A circumstance where you may wish to do this is if you have purchased a home with your second spouse and you have children from your first marriage. If you want some of the money from the home to go to your offspring when you die, talk to your partner and lawyers to make the right arrangements.
What happens to your mortgage after you die?
When you pass away, any debt you owe on your property (such as a mortgage) becomes a liability of your estate. This means the debt must be paid off before any proceeds from the sale of the property can be distributed to your beneficiaries.
It’s important to plan ahead to ensure that your estate has the resources to pay off outstanding debts. You may want to consider taking out life insurance or exploring other financial products that can help cover these costs. This will allow your beneficiaries to retain more of your assets.
How to split the proceeds of a property sale to multiple beneficiaries
If you plan to leave your property to multiple beneficiaries, it’s important to consider how the proceeds of a property sale will be distributed.
There are several options, including:
- Equal shares: This is the simplest option, where the proceeds are divided equally among all beneficiaries.
- Proportional shares: This option takes into account each beneficiary’s share of the property. For example, if one beneficiary owns 25% of the property and another owns 75%, the proceeds would be divided accordingly.
- Priority shares: This option prioritises certain beneficiaries over others. For example, you may choose to give a higher percentage of the proceeds to a beneficiary who has been caring for you in your final years.
Discuss these options with your beneficiaries and work with your lawyer to ensure your wishes are understood and documented so they can be carried out in a fair and legally binding manner.
Give yourself and your family peace of mind. Reach out to Crest Lawyers to start preparing your estate plan today.
Disclaimer: The information contained in this news post is general in nature and is intended to provide a general summary only and should not be relied on as a substitute for professional advice. Whilst the information is considered to be true and correct at the date of publication, changes in circumstances after the time of publication may impact upon the accuracy of the information.