Q: I own my townhouse and am preparing my will. I have three adult children but one has a partner whom I dislike and don’t want to leave the partner anything. I would like to leave my assets to my three children only. I am also thinking of making them tenants in common as I heard that this would negate inheritance tax. Should I consider making them joint tenants? I wanted to give the children an entry point into the housing market but what if one child wants to sell the property and the other two don’t want to sell?
A: Assuming that, in respect to your townhouse, if you leave it to your three children equally they will own it as tenants in common in equal shares. The other interpretation of this part of your question is that you don’t want to give anything to one child because it would end up in the hands of your disliked son-in-law. Be very careful using this tack. It is almost guaranteed to result in that child challenging your will.
There are no inheritance taxes in Australia. They did exist a long time ago, though, when they were affectionately called ‘death duties’, but they were abolished around the 1970s. The only tax potentially payable on the gifting of a property to someone in your will is capital gains tax (CGT). It could be payable by your beneficiaries, however, they will not have to pay CGT if the property was your principal place of residence when you died and certain other conditions are satisfied. The other concern you raise is about the gifting of the property to your children and the possibility that some of them won’t agree on what to do with the property.
You are right, in that that is always a potential issue where a property ends up in the hands of more than one person. One solution is for your will to require that the property be sold on your death and the proceeds given to the children. However, I generally advise clients not to do that but to leave the question of what to do with the property to your children. There may be a dispute about it but you have given them two benefits: the property and the decision-making to go with it. It would be hard for them to complain about that.
At some stage as well, you have to ‘let go’, as they say, and avoid trying to rule from heaven.