Future property set up

[NBS]

I was not sure how to title this or in fact ask the question .

My mum was in a retirement type place and enjoying herself and has been for a number of years as mum knew a lot of people there.

I ring up the other day as I do on a regular basic and mum says I just bought a house . Of course happy for what ever makes mum happy, mum can be impulsive and at 89 has not changed it seems. I ask why she did that and the response of "I had to leave something" to you both (brother and I). I said that was not required.

Now I have been power of attorney for a several years and have never given and thought of administrating an estate as mum had shares and furniture and that was it, I figured that was simple. Not expecting anything or wanting anything this has now changed.

I'm heading to Victoria in a few weeks on hols to visit mum, mum wants to discuss her will etc, while I am there. Knowing Mum she will not want any problems after the fact and would prefer to ensure it is set up now and in place.

The will I assume will be 50% of an unemcumbent property ($350000). I know my brother will want his in cash me I would prefer to keep the property and rent it out as its in a good location etc etc.

I guess I am wanting to get an understanding of what is required (yes I will has a solisitor engaged for the paperwork) and what implications if the property is just sold and split the monies or keeping it and renting out, or can I borrow against the property and pay the brother his monies. What tax / CGT, stamp dutiy monies are there.

Am I correct if the property is sold within 12 mth no tax or CGT is paid?
What about if the property is signed over to me by the brother within the 12 mths and I borrow against the property and pay my brother his share, is this possible and what again of any tax / CGT stamp duty implications.

Any thoughts on the above.

Thanks
Brian

 

[Rolf Latham]

I guess I am wanting to get an understanding of what is required (yes I will has a solisitor engaged for the paperwork) and what implications if the property is just sold and split the monies or keeping it and renting out, or can I borrow against the property and pay the brother his monies.
Thanks
Brian

Hi Brian

Subject to normal lending criteria such as serviceability, security quality and Loan to value ratio, this would be no different than any other sale, except since you already own 50 % with no debt you can borrow more that that if you wish and have a need and qualify.

ta
rolf

 

[Aaron_C]

Australia does not have an estate tax so when the property is transferred to you upon her death there will be no capital gains tax. However, if your brother sells his portion to you there may be capital gains / stamp duty payable for the transfer. I think the amount of capital gain will generally be based on what your mother paid for it but I am not 100% sure on this. As rolf indicated though, finance won't be an issue as long as you can service it.

 

[NBS]

Thanks for the replys, doing some reading today and from what I can gather depends also on wording in the will. Hopefully will not be an issue for many years.

Brian

 

[Paul Thewlis]

I had a client with a similar situation. The property passed into his name as executor and then tried to finance it with one of the banks to pay out other family members.

They also had some issues agreeing on a value for the property. I think you should agree on a methodology now rather try to work it out later. They ended up auctioning the property an client had to bit at auction.

As a result he had some trouble with the bank's attitude on stamp duty so we had to find him another lender.

Regards
Paul

 

[Terry_w]

There is no stamp duty or CGT event on the transfer of a property from the deceased to an executor of a will and none on the transfer from the executor to the beneficiary either. But when the beneficiary sells there may be CGT payable. In this case it would be a rental of the deceased so no main residence issues. The cost base would generally be based on what the deceased acquired it for.

Your mum might want to draft her will with the option of you receiving the property outright (or your share) or via a testamentary discretionary trust. Lots of tax benefits and asset protection benefits if a trust is used, but also some disadvantages such as no CGT or land tax exemption if you were to chose to live in it. Thats why having the option is important.

 

[NBS]

Thanks Terry, I dare say this is one that will need to be looked at and set in place well before it is required.

In fact will need to look at our will, don't want any issues for the kids later.

Thanks
Brian

 

[Terry_w]

Brian,

Some careful planning now can save your family heaps of tax later on.

I know someone who was bankrupt when his father died leaving him 1/3 of the estate. All of it will go to his creditors now - credit card companies. If he had got his dad to change his will to leave it to a testamentary trust this could have been avoided completely.

 

[jclegg]

Just my 2c worth and not professional advice!!
Get some advice on the land tax front and especially for trusts. My friend and his brother inherited a house which his brother now lives in. However, my friend has to pay land tax each year as it is not his primary residence. In his case there isn't even rent to offset against