I am due to receive a property under a will. Do I have to pay stamp duty?

If you are due to inherit a property under a Will, one of the main concerns that may be on your mind is will you have to pay stamp duty?

The answer depends on the specific circumstances.

If the Will specifically gifts an entire property solely to you, then you will not have to pay stamp duty, as this falls under the “devise in a Will” stamp duty exemption. However, you will still have to pay Title’s Office fees.

Similarly, if you are granted the “residue” of an Estate under a Will, and the “residue” includes a property, then once again there will be no stamp duty payable, just Title’s Office fees.

Alternatively, there are some situations where a gift of property may incur stamp duty.

If two beneficiaries are jointly gifted a property under a Will, however it is decided that the first beneficiary will take the whole property, and the second beneficiary will take cash instead, then stamp duty will be payable on the additional 50% of the property the first beneficiary receives. This is because the Will only envisaged the first beneficiary receiving 50% of the property. As a result, the stamp duty exemption only applies to the transfer of 50% of the property. Title’s Office fees will be still be payable on the full transfer.

If you think you may be gifted a property under a Will, talk to a lawyer at OFRM to confirm what is your likely liability for stamp duty. Alternatively, if you are thinking about including a gift of property in your Will, then talk to a lawyer at OFRM to ensure your Will is structured appropriately. Call 03 5445 1000.

Life Interests under wills

A life interest in a will is a type of trust created by the will which allows for a beneficiary (known as the "life tenant") to receive the benefit of an asset (i.e. a property) for the remainder of their life.

In the case of a property, the life tenant is not transferred the ownership of the property, but rather the property is held by the Executors for the life tenant to occupy, rent free, for the rest of their life. The life tenant is usually responsible for maintaining the property and paying all rates and outgoings; however they are also usually entitled to income generated from the asset.

A major advantage of a life interest is that you can elect someone to receive the benefit of the asset during their lifetime, and then upon their death, nominate who should receive the asset outright.

In blended family situations where you have a second spouse or partner, and children from a different relationship for example, a life interest may be beneficial as you can elect for your spouse/partner to receive a life interest in your property, and then upon their death, the property is to go to your children.

A life interest is governed under the "Settled Land Act", which importantly provides that if a life interest is created under a Will, there must be two trustees (Executors) appointed to govern the trust.

It is important that if you wish to include a life interest in your will you work with an experienced wills lawyer to ensure that the life interest is drafted appropriately. One important factor to consider is what happens if the beneficiary of the life interest needs to move to a nursing home or retirement village. An approach to this is to have the provision structured to allow the life tenant to sell the property if necessary say to move into a nursing home or retirement village. Upon the life tenant's death, the refund from the nursing home or retirement village is then dealt with in accordance with the Will.

Depending on your circumstances, a life interest could be a very helpful trust to include in your will. A Will & Powers of Attorney lawyer at OFRM can look at your circumstances to advise whether this is advantageous to your particular situation, and also ensure you comply with the relevant legal requirements. Call us on 03 5445 1000.

What are Enduring Powers of Attorney?

Since a legislation change in 2015, there are now two types of Enduring Powers of Attorney (EPAs) that can be created.

Financial & Personal Enduring Power of Attorney

This document allows your Attorney to assist with day to day tasks involving a financial transaction, which may involve:

• Banking
• Paying bills
• Buying or selling property or other assets
• Paying for accommodation needs such as nursing home or hospital fees

Once created, the financial side of the EPA comes into effect immediately. Although you may have the capacity to make your own decisions, it might be easier for your Attorney to assist you. For example, you might be overseas and need something signed at home, or you have broken your wrist and physically can’t sign. If you still have capacity, financial transactions can only be made in accordance with your expressed directions. Alternatively, if you do not have capacity, transactions can only be made if they are in your best interests.

The legislation change in 2015 saw the previously separate "Guardianship" EPA incorporated into the Financial and Personal EPA. The personal side of this document allows your Attorney to make decisions such as:

• Where you live (this may involve selecting alternative accommodation, such as a nursing home or retirement village)
• Who you live with
• Whether you should be permitted to work
• Whether you should give gifts to friends or family
• Restricting visitors (if in your best interest)

There are of course risks associated with a Financial & Personal EPA. You’re entrusting your Attorney with significant responsibilities; therefore it is important to think carefully about the correct person/s to appoint. You can appoint more than one person, and elect that they either be appointed jointly, jointly and severally (meaning either one of the Attorneys can sign), or appoint that the majority have to sign. Alternatively you might appoint one person in the first instance, and then elect a back-up Attorney.

Medical Treatment Enduring Power of Attorney

A medical treatment enduring power of attorney gives your medical Agent the ability to either consent or deny to medical treatment on your behalf, providing you don’t have capacity to make that decision yourself. This might either be a temporary situation, such as being unconscious, or more permanent, such as lacking mental capacity.

Your medical Agent has a significant responsibility, in what may be a very emotional and distressing situation, therefore it is important to have a discussion with your Agent about your wishes should they ever have to make medical decisions on your behalf.

Madeleine Vear is a lawyer in the Will & Powers of Attorney team at O’Farrell Robertson McMahon lawyers. You should give Madeleine a call to discuss your powers of attorney 03 5445 1063.

After I die, how long until my Estate is distributed?

After someone dies, it can be a number of months before the assets are distributed to the beneficiaries.

If a Grant of Probate is necessary, the Supreme Court needs to be informed of the current assets and liabilities of the deceased before probate can occur.

Therefore the first step is to ascertain from each individual organisation where money or assets are held and request current asset balances. It may take a number of weeks to receive this information.

Additionally, the Probate application cannot be prepared until the original Death Certificate has arrived and the intention to obtain Probate must also be advertised on the Supreme Court website 14 days prior to submitting the application.

The Supreme Court may then take a further 2-3 weeks to process the Probate application.

Once the Grant of Probate parchment has been returned, the administration process can begin. Assets such as bank accounts or nursing home accommodation bonds may take around 2-3 weeks to release to the Estate; however if there is a death benefit payable from a superfund for example, this may take significantly longer. There are a number of other factors which may stretch out the administration time:

• If there is a property which needs to be sold, this may take months to finalise.
• If there are shares to be sold, timing may be crucial, depending on the current state of the market.
• Personal or Estate tax returns may be required, which cannot be completed until the end of the financial year.
• There may be unknown assets which continue to emerge.

In these instances, the Executor may elect to make an interim distribution of funds already received (such as bank accounts), and a final distribution once all assets are finalised.

6 month time limit

Under the Administration and Probate Act there is a period of 6 months once Probate (or Letters of Administration, if there was no Will) is granted in which claims can be made on an Estate. If there is minimal risk of claims then interim distributions can be made, however if there is risk, it is advisable to wait 6 months before distributing any money.

If the Estate is relatively small and a Grant of Probate is not required, finalising the Estate can be a lot quicker, as the organisations may only request to see the Will and Death Certificate.

Overall, the process of administering an Estate is often longer than beneficiaries may realise. Some assets can be complicated and time consuming to finalise, therefore it may take months before an Estate can be fully administered, and significantly longer for complex estates. OFRM can answer any questions you might have about Probate and guide you through the process.

What does an executor do?

When a person dies leaving assets, it is the responsibility of the Executor (or Executors) appointed under the Will to deal with the deceased’s estate.

An Executor has a number of important responsibilities, which may include:

• Organising the funeral (usually with other family members) and obtaining the Death Certificate.
• Locating the original Will.
• Dealing with day to day tasks, such as redirecting mail, cancelling services, arranging for any pets to be cared for etc.
• Administering the estate. This may involve obtaining a Grant of Probate if necessary (see What is probate and who grants it?).
• Collecting the Estate assets (which may involve having them valued) and looking after them for the benefit of the beneficiaries, as well as notifying the beneficiaries.
• Ascertaining whether the deceased had any debts or liabilities, and if so, arranging payment form the assets of the estate.
• Keeping records and accounts (including distribution and payment) of the Estate assets and liabilities.
• Seeking advice from an Accountant regarding any potential tax liability, or whether any personal or Estate tax returns are required.
• Once all debts are paid, to distribute the remaining assets in accordance with the Will.

Having read that list, you will be realising being an executor is a significant responsibility with lots of duties attached.

In reality, the executor works with our experiences wills and estate lawyers to undertake these steps, some we do on behalf of the executor, others they do with our guidance.

There are two important matters to think about from that:

1. Firstly, you need to think carefully about who would be the right person to appoint as your executor
2. Secondly, working with the right lawyer to administer the estate can relieve the burden and stress from the executor and speed up the process

Did you know that in most instances the executor can choose which lawyer to work with? Whether it is thinking about your own will or if you find yourself as the executor of the estate, contact our Will & Estates team on 03 5445 1000 to discuss how we can assist you.

What happens to my personal and household items when I die?

Your personal and household items may have great sentimental value to you. These items might include your jewellery, your paintings, or an antique; however it also includes items such as your general household furniture, white goods and motor vehicles.

As long as these items stay in the family, you might not mind who they go to upon your death. However if items have particular sentimental importance or are worth a lot of money you may want to specifically provide in your Will who inherits these items.

In will language, your personal and household items are termed your “personal chattels”. This term is defined under the Administration and Probate Act to include (and some of these descriptions show the age of the Act):

• carriages
• horses stable
• furniture and effects (not used for business purposes)
• motor cars and accessories (not used for business purposes)
• garden effects
• domestic animals
• plate plated articles
• linen
• china
• glass
• books
• pictures
• prints
• furniture
• jewellery
• articles of household or personal use or ornament
• musical and scientific instruments and apparatus
• wines liquors and consumable stores

but does not include any chattels used at the death of the intestate for business purposes nor money or securities for money.

What if I don’t leave any instructions in my Will?

If you do not make any provisions in your Will about who these items should pass to, they are dealt with in accordance with the residue of your Estate. This may see everything going to your spouse or partner. Failing your spouse or partner, all may go to your children or your back-up beneficiary (depending on how your Will is drafted).

If you die without a Will, your personal chattels will be distributed in accordance with the rules of intestacy.

Overall, you might be happy to see your personal chattels falling into the residue of your Estate, therefore passing to whoever you have mentioned in your Will. However, if you have items of particular sentimental or monetary value which you want to go to someone specific, one of OFRM’s Wills lawyers will be able to assist in ensuring your Will is appropriately drafted to implement your wishes. Call us on 03 5445 1000.

Getting married? Add “update Will” to your checklist

Amongst the busyness of planning a wedding and getting married, updating your Will is probably not on your "to do" checklist.

However many people may not realise that marriage actually revokes a Will.

If you die without updating your Will after marrying, the rules of intestacy apply. As discussed in greater detail ("The perils of leaving it to chance"), if you do not have any children, then 100% of your assets will go to your spouse, which is what you may want anyway, however if you have children, they may be entitled to some of the assets. This is of course problematic if the only asset is the family home, which you intended would be transferred to your spouse alone.

Additionally, if you have a blended family, then the outcome of the intestacy may not be at all in accordance with your wishes.

How can I avoid this situation happening?

Obviously, the best way to ensure that your wishes are carried out is to update your Will as soon as you marry. However if you and your partner are making a new Will and marriage is pending you can make your Will "in contemplation of marriage" to your future spouse. In this case, your Will remains valid after the marriage, giving you peace of mind while you are on your honeymoon!

What about separation and divorce?

It is also important to keep in mind the effect of other relationship changes on your Will. Separation from a spouse does not invalidate your Will or any of the clauses in it. Therefore it is essential to update your Will as soon as possible after separating, to avoid a situation when a sudden death leaves all of your assets going to your ex-partner.

Similarly, although divorce does not invalidate your whole Will, it does invalidate the clauses relating to or benefiting your ex-spouse.

To avoid being caught out in a messy situation, remember to add "update Will" to your checklist if you’re getting married, separating or when your divorce is made. Speak to one of our Will & Powers of Attorney team at OFRM who will happily guide you through the process and ensure your Will is valid and up to date. Call 03 5445 1000.

What happens to my super when I die?

For many people, superannuation may be one of your largest assets and as difficult as it may be to think about death, you should not overlook your superannuation when making your will.

Upon death, if your super has not yet been realised, your superannuation will include the possibility of a payment of a death benefit which usually includes your super balance and any insurance benefits that you may be entitled to under the terms and conditions of your super fund.

You may be surprised to know that it is actually up to the Trustee of your super fund to determine whether there is a death benefit payable and who is to receive the death benefit. That is because your super is actually money held on trust by the trustee of the superannuation fund. The outcome is not necessarily in accordance with your Will or wishes.

However, most super funds allow you to nominate who you would like to receive any death benefit payable, and these nominations can be both binding and non-binding.

A binding nomination ensures your death benefit goes to the beneficiary you specify. This usually has to be updated every 3 years. You will need to complete a binding death benefit nomination form, which can be obtained directly from your superannuation fund.

A non-binding nomination is only persuasive on the trustee of your super fund, under the rules of the super trust fund and the super regulations; it is taken into consideration by the fund when deciding who to pay your death benefit to.

What happens if I have not made a nomination?

When determining who receives your death benefit if you have not made a nomination, the Trustee looks at who are your dependants. These include firstly your spouse or partner, then your children and lastly anyone in an “interdependent relationship” with you. An interdependent relationship is defined as someone who lives with you, is financially dependent on you and shares a close personal relationship with you.

If you do not have any dependants and have not made a nomination, then your super will be paid to your Estate and therefore distributed in accordance with your wishes in your Will.

An important consideration is that there may be different tax effects depending upon who the payment is made to, therefore it is essential to make sure you get advice from us to make sure your nomination is best for you and your family’s circumstances. Call 03 5445 1000.

Pensioner Concession/Exemption on Stamp Duty

Many people know of the stamp duty savings for first home buyers, particularly with recent increases to the Victorian schemes (and our own recent blog posts here and here), however you may not be aware that another scheme that is available is an exemption to stamp duty available for pension and concession card holders.

Generally, eligible people can receive a full exemption on stamp duty for home purchases valued up to $330,000, and a reduction in stamp duty for purchases up to $750,000. The benefit is only ever redeemable once.

Eligibility Criteria

To receive the discount you must:

• Hold an approved concession card
• Purchase the house for market value
• Plan to live in the property for at least 12 months as your principal place of residence

What if a buy a property from a relative or receive a gift?

The concession/exemption only benefits those who are purchasing a property for market value. Therefore, if a property is being sold for a reduced amount by a family member, you will not receive the benefit.

How can I calculate the benefit?

The benefit you will receive depends on a number of circumstances, however to give you an idea the State Revenue Office has created a handy online calculator.

As shown, the pensioner exemption/concession can be extremely beneficial. You may not have realised this benefit even existed, therefore if you are hoping to purchase a house and think this could apply to you, make sure you call the conveyancing team at OFRM on 03 5445 1000. You could be surprised at how much you could save!