How is Real Estate dealt with in Estate Planning and Estate Administration?
Real estate, or Real Property is land (with or without improvements) owned by one or more persons and is an asset that must be considered when dealing with a deceased estate. There are three types of real estate ownership: sole ownership, joint tenants, or tenants in common.
Each type of ownership has a different impact on how a deceased estate must be handled and requires different estate planning approaches to ensure that your interest in the property is transferred in the manner you wish.
Sole Ownership
Sole ownership over a parcel of property is exactly how it sounds: a single person owns the entirety of a property. If you wish to gift the property to someone in your will, it is important that estate planning measures are taken to ensure that interest in the property is transferred to the preferred. If the transfer of interest is not specified in your Will, your property may be sold by the Executor and the proceeds form part of your estate. This could cause hardship to your relatives and loved ones if they are depending on receiving the property.
Joint Tenants
Property can be owned by two or more individuals as joint tenants where the ownership of the property passes by survivorship. This means that your interest in the property is divided equally amongst the other surviving persons if more than two people are on the title as joint tenants.
In a joint tenant arrangement, this automatic transfer of interest bypasses the estate of the deceased and is not considered an asset of your estate. As a result, this type of interest in a property is not controlled by a person’s Will.
Tenants in Common
If more than one person owns a property and hold their shares as Tenants in common the co-owners of the property do not benefit from survivorship as in a joint tenancy; instead, the deceased’s interest in the property becomes part of their estate and is distributed by their Will. In these circumstances, it is important to consider estate planning options to r have peace of mind that your interest in the property is given to the person you wish.
Real estate can make up a large portion of your estate and it is essential that you are aware of the type of ownership which applies to your own property and make estate planning arrangements to ensure that it is dealt with in an appropriate manner according to your wishes if anything were to happen to you.
What happens if you do not have the property at the date of your death? You may need to sell the property during your lifetime to purchase a smaller home, or pay for an accommodation deposit, depending on your circumstances. How does this affect your wishes when it comes to the person to whom you have gifted the property in your will? You may wish to accommodate additional provisions in your will to ensure that person obtains a similar benefit or make other provisions if you sell the property.
If you have any questions about real estate and estate planning, you should call our Estates Team at Matthews Folbigg on 9635 7966 or email us at estates@matthewsfolbigg.com.au
