Managing Real Property in Estate Administration
What happens to real property after someone passes away? This question is crucial whether the property is specifically mentioned in a will or falls under the laws of intestacy.
When someone owns property and passes away, there are typically two scenarios:
Specific Bequest: The property is specifically left to a beneficiary or multiple beneficiaries.
Residue of Estate: The property falls into the residue estate for distribution among beneficiaries.
Transferring Property directly to Beneficiaries
If the property is specifically left to a beneficiary, or the beneficiaries of the residue property have decided to keep the property, it is usually transferred to the executors first and then to the relevant beneficiary/ies, making them the new owner. In Queensland, this transfer is exempt from stamp duty when it’s a gift under a will. However, there may be capital gains tax implications, especially if the property was an investment. It’s important to consult with a tax accountant for specific advice on capital gains tax if property has previously been an investment.
Selling the Property
If the property needs to be sold, the process involves several steps:
Transfer to Executors: The property is transferred to the executors via a transmission on death, allowing them to manage and sell the property.
Marketing and Sale: The executors must ensure the property is marketed appropriately to achieve the best possible price, guided by a real estate agent.
Distribution of Proceeds: After the sale, the proceeds are distributed to the beneficiaries. Again, capital gains tax may apply, so getting tax advice is crucial.
Key Considerations
Here are some important factors to consider when dealing with real property in estate administration:
1. Capital Gains Tax
If the property is an investment, identify early whether capital gains tax applies and seek advice from a tax accountant. Accurate records of the property's acquisition costs as well as ongoing income and expenses are necessary for calculating capital gains tax.
2. Multiple Beneficiaries
If the property is left to multiple beneficiaries, ensure it’s a practical arrangement. If there are conflicts, consider options such as selling the property or whether one beneficiary might consider buying out the others.
3. Is the gift subject to a Right to Reside clause
A right to reside clause allows someone to live in the property for a specified period or under certain conditions. Ensure all parties understand and adhere to these conditions to avoid disputes.
4. Joint Tenancy
If the property is owned as a joint tenancy, it automatically transfers to the surviving joint tenant upon death, regardless of what is in the will.
5. Income from Investment Properties
If the property is an investment, ensure it continues to generate rental income during the estate administration process. This helps provide ongoing benefits to the beneficiaries.
Handling real property in estate administration can be complex, but understanding the process and seeking appropriate advice can make it smoother. We’re here to help you safeguard your assets and provide peace of mind for your family.
Secure your estate planning with Vicca Law. Book a consultation today to ensure your real property is managed effectively and your wishes are upheld. Visit www.viccalaw.com.au or email lidia@viccalaw.com.au to schedule your appointment. Let us help you navigate the complexities of estate administration and protect your legacy.