Have You Considered The Importance of Estate Planning When Purchasing Real Estate?
Are you considering purchasing a property? If so, notwithstanding the excitement that you may feel, have you thought about how you will own the property? That means, will you own the property in your own name solely; with another; or will you use another type of structure, such as a family trust?
This is often one of the biggest questions that needs to be answered before purchasing a property. Ultimately, the manner of holding can determine the amount of protection that the asset (receives) and how the property will be distributed upon your death.
How should I purchase a property?
When purchasing a property with someone, there are two ways in which you can purchase that property; Joint Tenants and Tenants in Common.
If you own your property as a Joint Tenant, you own the property jointly with another person(s) rather than a specific ‘share’ in the property. This means that the property will automatically transfer to the survivor (or survivors) in the event of your death. This is a common choice for married and de-facto couples as it usually their intention to have their property passed to their partners.
If you own your property with another person as Tenants in Common, your share in the property does not automatically go to the other person. Your share is considered a distinct and separate share. Examples where people hold property as Tenants in Common is if it is being purchased with friends or as part of a business.
Why should I prepare a Will?
Once you have decided how you will own the property, the next important step is to discuss your estate planning, more specially, organising your Will.
It is important to prepare a Will so that you may direct where and to whom you would like your assets to go. If you die without a Will, your assets will be distributed according to the laws of intestacy; not necessarily how you would like.
Wills and property
If you purchase property as Tenants in Common, your interest in the property, upon your death, will be distributed according to your Will. In such circumstances, given you own your share in your own right, you are at liberty to do what you wish with your share which can include leaving your share to whomever you wish via your Will.
Further, having a Will in place can ensure that your partner can continue to reside in your property following your death by providing a life interest. This interest continues until your partner passes away at which time your children may then inherit the family home.
What happens if I don’t prepare a Will?
If you do not have a valid Will in place when you pass away, your assets will be distributed according to the laws of intestacy, this includes any property you hold as a Tenant in Common.
The Administration and Probate Act 1919 specifies that the first $100,000 of your estate will go to your surviving spouse or domestic partner and the balance of your estate will be split equally between your surviving spouse or domestic partner and any child or children.
This process is not only lengthy but it may (likely) also result in legal fees that may have been avoided if you had prepared a Will.
If you would like advice before purchasing a property or assistance in preparing a Will, contact us for an initial appointment today on 08 8362 5269, email [email protected], fill in our enquiry form here or visit our office at Suite 12, 15 Fullarton Road, Kent Town SA 5067.