Simple rules to help your next of kin inherit
Estate planning is a complex area! In most circumstances the testor is providing greater weight to surviving partner to ensure roof over their head aand ongoing income at the expense of the children as they become financially independent. No surprise therefore to see proposed changes to intestate to reflect most common outcome – surviving partner to inherit whole estate & no sharing with children.
General rules and interpretations about wills in NSW and VIC.
| Person dies intestate | Second Marriages | Solution | |
|---|---|---|---|
| Surviving Partner/ children | NSW – surviving partner receives the 1st $200k of the estate &50% of the remainder &balance to children in equal proportions | No will – spouse generally elect to keep the home | |
| OR Partner can elect to keep the home as part of their entitlement (where house is large portion of estate, partner will receive greater % then above & children reduced amounts) | Will – life interest1 [prohibitive to spouse as not flexible &cannot sell property – sometimes spouse will contest will to gain outright ownership] | Purchase property as ‘tenants in common’. Each partner owns ½ of property &their share passed on according to instructions in will. | |
| VIC – partner receives $100k &½ of remainder if 1 child or 1/3 if 2 or more children, and first option to purchase home at market value | Left to spouse [based on understanding spouse will leave to children but often spouse reneges] | Partner if wanting to retain home must buy out beneficiaries | |
| Step Children (from another marriage) | Life interest - on death of spouse, children inherit property |
1 Life interest – provide for surviving partner the right to live in the house for life.
In summary reforms already enacted in NSW and VIC is spouses, de factos and same sex partners are treated equally.
Life insurance is another method available to fund the payout of a mortgage. However must state the proceeds of any insurance be used towards the mortgage opposed to the proceeds available to estate and therefore executor. If insurance purchased via super ensure a binding nomination in favour of the estate and stipulate proceeds to be used to repay mortgage.