Other than superannuation, a home is usually the most substantial asset a person will own. It is important to consider what will happen to your home if you are a surviving joint owner, or a legal personal representative of an estate. In this article, we explore different types of property ownership and some requirements to deal with the property after death.
If two or more people own a property, it will be either held as a joint tenancy or a tenancy in common. How the property is owned is key in determining how the home will be dealt with after death.
When a home is owned as joint tenants, the whole of the property will pass to the surviving joint tenant by survivorship. That interest passes outside of an estate. Joint tenancies can be transferred relatively quickly once you obtain the death certificate.
When a property is owned as tenants in common, the share owned by the deceased forms part of their estate. The share of the deceased proprietor will be governed by the terms of their will (if they have one) or the intestacy legislation in the relevant state or territory. It is necessary to secure a court order called a Grant of Probate (or Letters of Administration) to transfer this property interest.
If you are unsure how the property is owned, you should look at the original contract for sale or the certificate of title if that is in your possession. Alternatively, your solicitor can undertake a title search which will reveal this information.
Often people are not aware that when a mortgage is fully repaid, there are documents that must be registered at the land titles office to formally remove the mortgage from the title. It is quite common that when people die, a mortgage will remain registered on the title even though nothing has been owing for a significant period.
From a practical perspective, the property cannot be dealt with unless (1) the mortgage is formally discharged or (2) the bank consents to the particular transaction. The solicitor acting for the estate will normally correspond with the mortgagee on behalf of the legal personal representative.
Whether or not a beneficiary inherits the home subject to an outstanding mortgage will depend on several factors. These factors include whether the home was a specific gift (as opposed to part of the residuary estate), other terms of the will and legislation (which provides that a person taking property takes it subject to any debt).
On the death of all owners, the legal personal representative will need to decide what to do with the home (subject always to the terms of the will).
If the intention is to sell the home within the estate, it is necessary to first transmit the property from the deceased person into the name of the legal personal representative. The legal personal representative then steps into the shoes of the deceased owner, and effectively acts as the seller in the conveyancing transaction.
If the property was the main residence of the deceased person, the legal personal representative will generally have a two-year period from death to effect settlement and take advantage of an exemption from the payment of capital gains tax.
If the main residence is being transferred to a beneficiary, there will be no immediate tax consequences. Usually, the beneficiary will inherit a cost base for the property that represents the market value at the date of death of the former owner. It will be a matter for the beneficiary at a later date to pay any capital gains tax that may arise on the sale, with reference to the cost base.
It is worth noting that ACT Land Titles, and the land titles offices in many other jurisdictions, no longer issue physical certificates of title and have moved to an electronic titling system. This has created efficiencies and overcome the issues which used to arise when clients could not locate a certificate of title.
Losing a loved one is difficult emotionally and there is generally substantive legal work that must be undertaken, often within certain timeframes. BAL Lawyers specialise in Wills and Estates and their Team can guide you through the process.