It can be devastating when a loved one dies so the last thing you want to think about is finalising a deceased estate.
Whether it’s your wife, husband or your parents, understanding where you stand when property is bequeathed is something you should legally finalise before that day comes.
However, if death comes out of the blue and there is no will in place, it’s important to understand the legal process and how a mortgage broker can help.
What happens if my partner dies?
When your loved one passes away, your right to their share in the property will come down to the ownership arrangement.
The two types of co-ownership in property are joint tenants or tenants in common.
Joint tenants is the most common form of ownership where you and your partner own equal shares in the property.
If your partner passes away, their share goes to or is “bequeathed” to you as the survivor. Ownership of the property automatically reverts to sole ownership.
You can then arrange with a solicitor for the property title to be changed so it’s solely in your name.
Where it is tenants in common ownership, a will will determine how your partner’s share in the real estate is to be distributed, whether it’s to you or someone else.
This is the main point of difference between joint tenants and tenants in common and it can cause a lot heartache for families who will never know their loved one’s plans for finalising a deceased estate.
Will I inherit the mortgage?
Being the beneficiary of real estate is one thing but you also inherit the outstanding mortgage as well.
With the first priority funeral arrangements, settling debts of the deceased is often an afterthought.
Many people in this situation have no option but to sell the property to pay out the existing mortgage, specifically when the lender calls in the loan and assesses your ability to make the mortgage repayments.
As often happens, your sole income alone is often not enough to pay the home loan.
Many people want to stay in their property at all costs, especially if it’s the family home.
This can cause many to fall into arrears, making it difficult to then refinance your home loan and get access to cheaper interest rates so you can continue paying your mortgage.
We have lenders that can help you if you’re in this situation so please call us on 1300 889 743 or complete our free assessment form today.
So how will the assets get distributed?
Let’s say you were previously married and have biological children from that relationship.
You’re currently in a relationship or married and own a property as joint tenants with your current partner.
In the event that you pass away and there isn’t a will in place stipulating that your share in the property will go to your children, your stake will go to your current partner.
Your partner may then decide to name his/her own biological children as beneficiaries in his estate and cut your children out completely.
It’s not pretty but it can happen.
That’s why it’s essential you and your partner discuss estate planning with a solicitor before buying a property so you can then decide on what type of ownership works best for you.
If you’re in a second marriage and have children from your first relationship, you can change your ownership in your property to tenants in common at any time with the help of a solicitor, bearing in mind that you will need the consent of your joint tenant partner to do so.
What if I am the sole owner of the property?
If you’re the sole owner of a property when you pass away, sale proceeds of your property will go to whomever you specify in your will net of any existing debt or tax liabilities that needs to first be settled, including the mortgage.
What if there is a will in place?
If there is a legal document that sets out directions for the administration and disposal of your loved one’s property, it’s important that you and your family members are made aware of where the original will is located.
As so often happens, the deceased, whether it’s your spouse or your surviving parent, don’t actually let their beneficiaries know where they’ve left their will.
You can start by looking in seemingly obvious places like desk drawers and any filing cabinets in the home.
Consider that your loved one has left the original will in a safety deposit box as well. You can check this with their bank.
Although the deceased has the only right to a safety deposit box, the bank may allow access if you’re an immediate family member.
Another good bet is to ask the deceased’s lawyer (if they have one) because they may have been involved in drafting up the will.
If not there, wills finalising a deceased estate are sometimes left with the local probate office.
What if there was no will in place?
If there was no last will and testament left or you simply can’t find it, this is known as ‘dying intestate’ and requires the Supreme Court in your state or territory to appoint an executor in finalising a deceased estate.
As per common law, the deceased’s assets are distributed according to the succession laws of your state.
You can find out more about the role of an executor by checking out the ‘Being an executor’ page on the Law Society of New South Wales website.
What is probate?
Before the executor of will can distribute funds, they need to obtain probate or authority from your state’s Supreme Court to do so.
As part of the probate process, people who believe they have entitlement to part of the deceased estate can contest the will.
This can include other family members or creditors like the Australian Taxation Office (ATO) wanting to settle an outstanding tax debt, utilities companies and telcos.
The bank may even become involved if the deceased was the sole owner of the property and there is a shortfall in the sale of the property to cover the outstanding mortgage.
These parties will need to paid out first with beneficiaries entitled to the remaining funds.
What’s the process of finalising a deceased estate?
As soon as your loved one passes, the deceased estate is automatically transferred into a trust until it’s decided how the property and other assets are to be distributed to the beneficiaries.
The outcome will depend on whether there is an estate executor (if there is a will in place) or a Supreme Court appointed administrator.
With a will in place, you need to go to probate court so it’s best to seek the help of a solicitor.
They can call on all of the deceased’s assets and advise the total payout amount including interest.
All of this needs to gathered, signed by the executor of the will and lodged with the probate court.
The Supreme Court can take between anywhere between 2 and even 8 weeks depending on how many cases they’re processing.
Do you need help finalising a deceased estate?
As a mortgage broker, we can’t advice on legal and tax implications of finalising a deceased estate.
However, if you were joint owners in a property with the deceased, we can assess your financial situation and let you know if we can refinance your home loan so you can keep your home.
We know lenders that will take a common sense approach to your situation!
Call us on 1300 889 743 or complete our free assessment form today to speak to one of our specialist mortgage brokers.