Property is often the biggest asset in an individual’s portfolio. Gifting property to a beneficiary in your will requires careful estate planning, and the process differs depending on the ownership structure.
Under this structure, the individual may gift property to a beneficiary at their own discretion. Since the house is entirely their own legal property, there is more freedom to bequeath it in a will according to their own demands.
Under Australian law and as noted on the Australian Taxation Office website, capital gains tax (CGT) applies to any change of ownership of a CGT asset, including property, unless it occurred prior to 20 September 1985. With very few exceptions, this tax applies to property gifted in a will, so take this into account while choosing your beneficiaries.
This structure is most common in married couples. If the will maker passes away, the property will automatically transfer to the other owner and vice versa. The property will not form part of the will maker’s estate, as it is no longer under their ownership. Rather, the other owner inherits it and is entitled to treat it as per their own wishes.
Tenants in common
When the property is owned by several people, the will maker is only entitled to gift their section of the property to a beneficiary. The other owners of the property will continue to posses their share after the will maker passes away. Therefore, if this structure applies to you, your beneficiary will have to own the property alongside these other owners.
In the event that these other owners die before you, their wills shall dictate who inherits their share of the property. This process sometimes results in problems between owners, especially when they do not intend to inherit property alongside certain people. Ensure your estate planning always seeks legal advice from experts early on to avoid such issues.
If the people you currently own the property with do not have a will, the laws of intestacy will apply after they are deceased.