What Happens To My Property When I Die?
Written by: Karlene Wightman l Legal Team
It is not at all uncommon for a person to die with a property or properties in their Estate. Most often, an Estate will consist of at least a primary residence, and sometimes their Estate will also consist of an investment property.
There is often a considerable amount of uncertainty by an Executor or Executors when a property is left in the Estate. Questions arise such as: What are my responsibilities? When can I sell the property? Can I enter and clean out the property? And the list goes on! We will attempt to cover as many of the main considerations within this article.
Primary Residence
When a person dies and leaves their family home in their Estate, Executors often worry, not only about what the process is and what they need to do but also what the options are in relation to the sale or the transfer of the property. There are a number of considerations:
1. Insurance On The Property
One of the first, and arguably the most important things to do when a person dies and a house is left vacant, is to notify the insurance company. The insurance company must know that the owner has died and that the house is vacant.
If the home is not vacant, because a child was also living in the home, for example, they should still be notified of the person’s death. The main reason for this is that the insurance company may have extra requirements if the property is vacant. If they were not informed, and something happened to the property, the insurance company would refuse to pay.
If the Executor is unaware of who the insurance is held with, a new policy should be taken out. The reason for this is that the Executor will ultimately be responsible if they have not taken all the necessary steps to protect the property and will be personally liable to satisfy the claim.
2. When Can An Executor Clean Out The Property + Place The Property On The Market?
The Will itself gives the Executor the right to clean the property and dispose of its contents in accordance with the Will before the Grant of Probate has been obtained. The Executor also has the right to engage a real estate agent and place the property on the market before the Grant of Probate is obtained.
Many people do not realise that a Contract of Sale can be prepared ‘subject to the Grant of Probate being obtained’. If the Grant of Probate is not obtained by the settlement date, the settlement will occur 14 days after probate has been granted.
Want to know more about Grant of Probate, what it means and when it’s needed? Check out this previous article we put together: What Is Probate?
Sale of Property -vs- Transfer To A Beneficiary or Beneficiaries
An important question to be considered is whether the property is to be:
- (a) sold;
- (b) transferred to the beneficiaries in equal shares; or
- (c) transferred to one beneficiary who will buy the other sibling(s) share of the property.
Sometimes the decision is simple, other times it can be much more complicated. Especially when dealing with people’s emotions and attachments to the property itself (often the home has been in the family for many years), it is not always straightforward that the property should be sold.
While there is absolutely no rush to make the decision, the Capital Gains Taxation rule allows a property to remain in the Estate for two years from the date of the person’s death, without incurring capital gains tax. After this time, capital gains tax will be incurred unless there is a good reason as to why an extension should be granted.
4. Application by Legal Personal Representative
The first step in any property transfer is placing the property into the Executor’s name. It is made clear on the title that the Executor is holding the property on trust for the deceased and that the property is not transferred to them as an individual. The property cannot be sold or transferred without this step occurring. It can, as mentioned above, be placed on the market and a contract signed.
5. Transferring The Property To A Beneficiary/Beneficiaries
One option available to a beneficiary or beneficiaries is to have the property transferred into their individual names. This often does not occur, as there is more than one beneficiary and often, they are at different stages in life and do not all want to keep the property. If the property is transferred into the beneficiaries individual names, the property is often used as an investment property and will incur taxation consequences.
The second option is that one beneficiary will want to keep the property and so, will buy the other beneficiaries share. The beneficiary obviously needs enough money to buy the other beneficiaries share and the property needs to be purchased at market value.
6. Selling The Property
It is often the case that the Executors/beneficiaries choose to sell the property. It is often too difficult or expensive to keep it and therefore the most straightforward solution is to sell it.
If this is the case, the Executor selects the real estate agent and any costs associated with the sale are deducted from the Estate. While the Executor is the person who has the final say when an offer is made, the property does need to be sold at market value. Once the property has been sold, the usual conveyancing process applies. The sale proceeds are paid to the Estate and the monies are divided as per the Will.
7. Investment Property
The process is basically the same when dealing with an investment property. Sometimes, depending on where the property is located and the purpose of the investment property, for example, a holiday house, there can be conflict amongst the beneficiaries in relation to whether the property is sold or transferred. However, all of the above considerations will still apply.
Expert Legal Advice with Canny Legal
There are many considerations involved when dealing with a deceased person’s real estate. It can be a straightforward process, but when emotions are heightened, it may not be. It is important that an Executor receives legal advice in relation to their obligations and options, and this is where Canny Legal can assist to make the role of Executor as easy and efficient as possible.
Get in touch with our team today so our team can take the stress off your shoulders!
