No matter how old you are, once you have a significant value in personal assets, it’s time to put together your will and overall estate plan. It doesn’t have to be morbid or particularly sentimental, this is simply a way to get your affairs in order and make sure that if something should happen to you tomorrow, your family will be able to benefit from what you leave behind. Most importantly, you want to ensure that the money and assets you leave behind will be readily available without delay, legal dispute, or unnecessary hassle for your loved ones. This is especially important when it comes to any properties you own, partially or completely, alone or together with others. Managing title ownership and registration has always been a tricky subject in Australia and a properly planned estate will help you get your property into the possession of your intended inheritors as quickly and easily as possible.
The State of Your Title
The names and details on your current title matter a great deal the moment you shuffle off the mortal coil. The type of title, how much you own of it, and who you own it with will influence what can be done no matter what you write in your will. If you are still paying off your mortgage, the terms of the mortgage and your mortgage insurance (if any) will determine what financially must be done with the property before anyone can become the next official owner. If you own it with another person, that person may have full or partial control of the property when you pass on.
Joint Tenancy and Inheritance
Joint tenancy, in which your names are equal on the title, is the default for married couples but can be chosen by unmarried individuals as well. With this form of ownership, both parties own 100% of the property together. No major decisions can be made about the property without a unified agreement. However, the interesting thing about joint tenancy and estate planning is that a property you own jointly is not officially part of your estate. When you pass away, full ownership is automatically granted to your joint-tenant, removing it from your assets to be distributed. This makes it the easiest possible form of granting inheritance, as long as you’re willing to jointly own the property with your inheritor in the first place. While most people do this with their spouse, you could also alter your title to include an adult child or even a best friend during your estate planning process.
Title Transfer: They will eventually need to update the title to remove the name of the deceased, but delays shouldn’t interfere with their legitimate ownership.
Tenants in Common and Partial Inheritance
The other form of owning property with another person is a title that indicates you are tenants in common. In this configuration, you and any number of other people each own a share percentage of the property. You cannot interfere with each other’s shares but you can leave your share to your inheritor(s) making them a new tenant in common with the others when you pass away. Make sure to consider the possibility that your inheritor doesn’t want partial ownership of something and include a clause in your estate plan that allows them to sell to the other co-owners.
Title Transfer: The title will need to be altered to replace your name with your inheritor’s before their partial ownership is legally valid.
Dealing with the Mortgage
The state of your mortgage is another major influencer in how you should consider leaving property to your inheritors. If you have already paid off your mortgage, congratulate yourself and skip to the next section, otherwise ready or mortgage terms carefully and determine what their policies are for when a client predeceases the final payment. Some will demand that the mortgage is refinanced in your inheritor’s name while others may want the entire rest of the amount paid off out of your estate funds. Make arrangements for whatever financial manoeuvres will need to be made in order to smooth out this process for your executor.
Title Transfer: While you still have a mortgage, the bank officially holds your title, though your name is also on it. This will need to be adjusted whether the amount is paid or the mortgage is refinanced.
If you are leaving your property to a child under the age of 18, they are not allowed to be the official owners until they come of age. In this circumstance, your executor will be set with the task of establishing a trust to hold onto the property for the child or children for a few years until they are able to fully inherit. If it suits your personal finances and legal circumstances, you can save your executor the hassle and take care of forming a trust on your own. This will transfer the official ownership of the land to the trust itself but you can set yourself up as the trustee and then indicate in your will that your children will be the beneficiaries in the event of your death. This may sound complicated, but it is a safe and well-established way to leave property to children.
Title Transfer: You will need to make a title transfer when you form the trust and put the property in its possession. A second change will need to occur when you pass on and trustee-ship changes hands and a third title transfer will occur when the child comes of age and inherits.
Title transfers are an inevitable part of estate planning and property inheritance in general. Even in the case of joint-tenancy, your spouse or partner will eventually have to have your name removed from their title. One of the best things you can do for your family is to have a plan that includes these trickly legal manoeuvres, up to and including indicating which conveyancer you’d like them to use and making arrangements so that the transfer is as smooth and hassle-free as possible.
Need help with title transfer? We’re here for you.
Want to learn more about conveyancing? Download our free conveyancing guide here.