4th May 2017
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Transferring parents’ home to stop sister inheriting
Author: Rod Cunich
Woman seeks financial estate planning advice to disinherit someone

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.

Q. Kerry
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 newsletters@yourlifechoices.com.au

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    COMMENTS

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    Old Geezer
    12th May 2017
    10:33am
    If she is excluded she can still claim her fair share and possibly more if she is in a poor situation financially.
    Anonymous
    12th May 2017
    11:03am
    How about you give the estranged sister $1.00 in the will and put in a statement that anyone who contests the will will get nothing. Problem solved, it worked for someone I know.
    Trees
    12th May 2017
    11:24am
    The estranged sister wouldn't be able to get a share of the house if they follow the advise given above because the house would already by in 3 siblings names only.
    As for contesting the will for anything remaining the excluded sibling probably can if she has the time & the money to do so & if she is mentioned in the will or a previous will.
    Slimmer Cat
    12th May 2017
    11:32am
    ROBY are you living in the times of Charles Dickens. $1.00 what a laugh.
    Leave the sister a reasonable amount $10,000 and mention why she has not been given more and problem solved. The amount left all depends on the value of the property. You might solve the problem with $2,000.
    Anonymous
    12th May 2017
    3:49pm
    Hey Slimmer Cat as I said I have seen it happen and there was plenty said but no legal problems .
    If you don"t like someone why leave them thousands of dollars as you said you are asking for problems, I am glad you are not helping me with my will.
    OlderandWiser
    13th May 2017
    1:13pm
    In NSW, it doesn't matter how much is left she can still contest the will and even if she loses, a massive portion of the estate goes in legal fees. It's a disgusting system! I know of a case where someone left $80000 out of a $400,000 estate contested and got more despite a clear statement in the Will and in a further Affidavit explaining very valid reasons for the bequests. 25% of the estate disappeared in legal fees, and it's impossible to see where they delivered any real value.
    don
    12th May 2017
    11:50am
    The only way some one can be excluded in a will eg sister , brother and even an ex wife is by having a trust set up. A friend who supported his ailing mother , and when she died , the long lost ,daughter , forged the will etc etc, and when he challenged it lost as he was deemed well off , and she poor and hard up . He got nothing, she got a property that was worth a great deal. When I did ours , we were told by a high priced lawyer , the only way to exclude anyone 100% was to set up a trust.
    Anonymous
    12th May 2017
    3:50pm
    Spot on Don.
    Maggie
    12th May 2017
    11:52am
    Poor lonely estranged sister. What dreadful thing can she have done that even the mother who gave birth to her wants to cut her off?

    I am always suspicious of children trying to organise their parents' Wills. If the parents want to go ahead with this, they should do it without interference from their children.
    Sundays
    12th May 2017
    12:37pm
    I agree Maggie. I have a friend who is estranged from her family because they don't like her foreign born husband. At the end, will the parents really be happy knowing that they disowned their child. The article doesn't mention that gifting their home may exclude the parents from any OAP.
    Radish
    12th May 2017
    1:01pm
    It is very difficult to exclude someone from a Will.
    Janran
    12th May 2017
    1:17pm
    Maybe the excluded sister is a drug addict, who has already ripped off the parents considerably? We don't know. In that case, best she doesn't get her hands on any more money (except for re-hab).

    I agree with you both, Maggie and Sunday, it would be a travesty of justice if the sister was excluded simply because she married a foreigner, is gay or something like that regarding her personal life, which doesn't result in anyone being a victim of her behaviour.
    OlderandWiser
    13th May 2017
    1:16pm
    There can be valid reasons for exclusion of a child from a will, though I agree it may seem hideously cruel. NSW laws do not properly recognize a common issue where, in a blended family, one child inherits significantly from a parent and the other child gets nothing. I know of several cases where a parent has tried to balance that unfairness by excluding a child who already inherited from a parent while their half-siblings did not. Sadly, NSW courts overturn such clauses and make the bequests grossly UNFAIR.
    Rosret
    12th May 2017
    12:17pm
    You forgot to mention the fourth child. I hope she takes the 3 ugly sisters to court. What a terrible thing to do.
    Rosret
    12th May 2017
    12:21pm
    - and seriously - her parents couldn't harm the fourth child anymore than that even if they were virtually penniless.
    Love your children no matter how far they travel or how far they stumble from the right path. They need to know they are loved unconditionally.
    Happy Mothers' Day - what a joke.
    Trees
    12th May 2017
    1:42pm
    Rosret - amen to that
    Anonymous
    12th May 2017
    3:52pm
    There is always a good reason to de-will someone, I think
    Radish
    12th May 2017
    5:12pm
    There is a way of giving money to one person.

    Buy an insurance bond and make the person you wish to bequeath it to as the beneficiary.

    It does not have to go through the estate at all.
    Radish
    12th May 2017
    5:12pm
    There is a way of giving money to one person.

    Buy an insurance bond and make the person you wish to bequeath it to as the beneficiary.

    It does not have to go through the estate at all.
    OlderandWiser
    14th May 2017
    7:05am
    Rosret, bequests in wills often have nothing whatever to do with love. Sometimes they are about fairness. When one child has received their fair share prior to the death, or one child has contributed substantially (and at significant cost) to the parent's well-being, it may be appropriate for a parent to favour some children over others.

    One case I heard of involved three daughters and one son. The daughters received a large ''dowry'' when they married and the son was to be left the family farm which was his livelihood and which he had built up over the years. He also cared for and fully financially supported his mother for 20 years after his father's death. The terms of the will were known and agreed to by all long before the mother died, but the sisters challenged and the son had to take a huge mortgage on the farm to pay them out, because he was unable to prove the prior agreement or the huge handouts they had received when they married.

    In another case, a father had been supporting his drug-addicted daughter for many years while his son worked hard and cared for his dad as well as his own family, topping up his dad's pension income regularly to make sure he lived in comfort (but unaware that the top-ups were needed because dad was handing out to his sister!). Dad left 80% to his son, but the courts reversed the allocation because daughter claimed ''need'' to service her drug addiction.

    In another recent case, an unmarried child who had lived on welfare defrauded a parent and forged a signature to steal a substantial sum was able to challenge the will and receive further benefit despite having over $1 million in assets inherited from another relative, merely because the other beneficiary - who was married with a family - had slightly more net assets (every cent of which were earned through hard work!). The facts of the case were completely ignored by unconscionable solicitors who claimed consideration of the fraud and forgery or the other valid reasons for the bequests in the will would impose excessive legal costs, so only the relative wealth of the heirs could be considered. The legal bills nevertheless exceeded $60,000.

    Please stop implying it's about ''love'', because that is part of the reason the current laws are so seriously flawed and lawyers are able to party on the proceeds of unfair claims by unconscionable people who have an entitlement complex, or just a malicious desire to cause hurt to a sibling they dislike or are jealous of.
    Nan Norma
    12th May 2017
    4:43pm
    Don't kid yourself. I have a sister who would have taken everything from me and my other sister given half a chance even though she was left a third. She had already been taking everything from my mother for years but still thought she should have had everything.
    OlderandWiser
    13th May 2017
    1:17pm
    Me too.
    Blue
    8th Jan 2018
    9:08am
    Me too
    Nan Norma
    12th May 2017
    4:48pm
    Pity we don't know the reason the fourth daughter was to e excluded.
    Nan Norma
    12th May 2017
    4:48pm
    Pity we don't know the reason the fourth daughter was to e excluded.
    Watto
    12th May 2017
    8:45pm
    Take off the Rose coloured glasses Rosret.


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