With recent studies suggesting almost half of Australians passing away do so without leaving a will, it’s alarming to think that a significant percentage of us are departing our loved ones unaware of what’s happening with our estates.
Depending on personal circumstances, family dynamics, where someone resided, and a number of other factors, real property and its associated affairs may become the financial responsibility of your next of kin.
Let’s look at what happens to your property after you die in a little more detail:
What happens to my mortgage?
While any mortgages you hold are never ‘wiped clean’, your next of kin or nominated beneficiaries won’t technically or necessarily ‘inherit’ your debts either.
Other than exceptional circumstances, legal processes surrounding debts and inheritances are designed to allow for an estate to cover any outstanding mortgages in an attempt to avoid any carry-over to the beneficiaries.
Unfortunately, this isn’t always the case meaning the beneficiary can take over the responsibility of paying the bank back. Usually, the only realistic option for the recipient is to sell the property to pay the money owing.
In the event of a shortfall following the property’s sale, any remaining mortgage debt will still need to be paid by the successor.
You may also like to leave an explicit direction in your will requesting that the estate is to be used to pay off a specific mortgage.
Asset Distribution from a Will
Your will should clearly state your intentions, wishes and other requests in relation to:
- Who you’d like to inherit your estate
- How much of the total value each beneficiary will receive, and
- Who you’ve nominated as the Executor to the will – (distributor)
It’s important to carefully consider who you’d prefer to inherit the responsibility of accessing, managing and distributing your property and other assets. This should be someone trustworthy and capable of delivering on your requests timely and efficiently.
What happens if I don’t nominate an Executor?
Failing to nominate at least one Executor means your assets will be distributed by a person who is granted access by the state’s Supreme Court through an application process known as filing for Letters of Administration.
This can open up a whole world of alternate legal battles, encourage will challenges and allow other people to attempt to contest your estate’s distribution more easily.
The bottom line is that a clearly decided-upon (and mentioned), Executor can save your family a substantial amount of time, hassle and heartache when it comes time to distribute your property assets.
What about property I own with someone else?
If you’re involved in joint property ownership with others when you die, the surviving owners will then bear the full responsibility of the remaining mortgage.
Where a surviving owner cannot afford or service the mortgage left to them, the final option is to sell the property to pay off the debt.
Remember, legislation regarding property and mortgage transferability varies between states meaning conditions and other exemptions may apply under certain circumstances.
Can I specifically dispose of my real property?
Property solely owned by you and in your own name is eligible to be ‘disposed of’. Each state enforces different legislation regarding what property types can or cannot be disposed of by an individual.
Depending on your place of residence, assets that can be disposed of may include real property and land, intellectual property, shares and bank accounts, among a range of other property types.
If you’d prefer your property assets to be legally disposed of, meaning no one is entitled to inherit them, you’ll need to request this in your will specifically.
Why You Should Create a Will
The most significant benefit of creating a valid will is to ensure the law protects and properly distributes your assets and carries out any other requests according to your passing wishes. Other reasons why you should be making a will include:
o You specifically decide who receives what.
o You can start managing, organising and paying down debts in advance to satisfy or fulfil your inheritance plans. E.g. setting aside a lump sum to either fully or partly cover a mortgage.
o You’ll have the peace of mind knowing there won’t be any disagreements or contests for your assets.
o You still have the opportunity to explain and discuss how and why your property assets will be distributed in the manner you’ve chosen.
Disclaimer: The content of this blog is intended to provide a general guide to the subject matter. This blog should not be relied upon as legal, financial, accounting or tax advice.