Legal expert Rod Cunich offers this general advice to Kerry’s inheritance question.
Kerry’s family is estranged from one of her sisters and they are keen to put in place the correct legal arrangement to ensure she does not receive any part of the parents’ home as inheritance. Legal expert Rod Cunich offers this general advice.
I am one of four siblings but three of us have been estranged from our sister for over 10 years. She has been excluded from our parents’ wills. Is transferring the family home to the three of us now the only way to ensure she can't make a claim on my parents’ estate once the surviving parent passes?
A. Provided by Rod Cunich
Taking into consideration the caution mentioned below, transferring the home now is the best solution, subject to the following:
- you will have to pay stamp duty
- once owned by the three of you, it is likely that the property will lose its exemption from capital gains tax as principal place of residence and CGT will begin to accrue from the date of transfer.
- there are risks for your surviving parent, including:
a) loss of use of their home. This could be addressed by making the transfer subject to a formal documented ‘right of occupancy’ and/or ‘life estate’. This might also help preserve the CGT exemption. Your parent would need expert tailored legal advice to address these issues
b) once the siblings own the home it can’t be used to fund your parent downsizing or funding a move to a retirement village or nursing home if it becomes necessary. Again this risk can be addressed in a formal document that gives your parent the required protection. This might involve ‘a mobile life estate’, that is, a right to sell the home and use moneys to buy replacement with the same ownership and life estate arrangements moving to the new property or other obligation for you and your siblings to fund the move. Again your parent would need expert tailored legal advice to achieve the desired outcomes.
- It is critical that your parents are independently advised to ensure their rights are protected and to reduce any suggestion that you have coerced them into the transaction. A court might reverse the transaction or order the payment of damages if satisfied you used undue influence or otherwise coerced your parents to enter into the transaction.
Caution: If the property is located in NSW, there are unique legislative provisions (Succession Act PART 3.3 - NOTIONAL ESTATE ORDERS) that empower a court to undo transactions entered into for the purpose of defeating a claim by a person who is entitled to a portion of the estate. In broad terms, the transaction would have to survive three years before it was safe from these claw back provisions. So if located in NSW obtain sound legal advice and move sooner rather than later.
Disclaimer: This information has been provided by Rod Cunich and should be considered general in nature – legal advice should be sought.
Rod Cunich is a lawyer with over 30 year of experience who specialises in estate planning. If you have a question for Rod, simply email it to firstname.lastname@example.org
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