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Estate planning & investment properties

Discussion in 'Estate Planning' started by Shino, 26th Nov, 2014.

  1. Shino

    Shino New Member

    Joined:
    26th Nov, 2014
    Posts:
    3
    Location:
    Paynesville Victoria
    HI
    I'm after some advice on estate planning with regard to our investment properties.
    We have 3 properties in both our names as Joint tenants, no problem there.
    We have 4 properties in my husbands name only as he is the highest wage earner. However my name is on 2 of the loans. I have only realised that in the even that my husband dies these properties would go into his estate (which I would be the sole beneficiary) and the rental income would go into his estate as well. However as the loan is in both our names I think I would be responsible for the mortgage repayments, is this correct?
    We have bought 2 more investment properties since then and this time we made the ownership struture tenants in common, 99% my husband 1% me, so the properties titles are in both our names as is the rental income and the loans. Can someone tell me am I correct in believing should my husband pass away during the time it would take for his estate to be finalised I would still be able to access the rental income from these two properties to pay the loans? If so should we be adding my name to the titles of the properties that are still in his name solely? We live in Victoria.
     
  2. Terryw

    Terryw Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    653
    Location:
    Sydney
    I see a few issues

    1. JT doesn't allow for a share to be left to a testamentary trust
    2. With JT If bankruptcy occurs just before one dies the whole house could be lost instead of half (think if one sick and the other takes care, neglecting finances).

    With TIC
    1. You share can be left to anyone, spouse, or a testamentary discretionary trust for extra tax and asset protection benefits
    2. If one party is becoming unstable financially the will of the other person can be changed so that if they were to die they could leave their share of the property to a discretionary trust or to some other family member - to avoid creditors getting it.

    I also don't like 99%/1% shares. 1% is next to no value, but you have exposed yourself to the whole loan risk.

    If 2 people are on th loan then both are responsible for the whole debt if one cannot pay. If one owner dies the loan will continue on. Banks will be happy for a while, but when title passes the loan may need to be renegotiated.

    If one owner dies then their rental income would pass to the estate. if you are joint owners then the share of the rent would go to the estate. The executor or administrator can then pay the loan out of the deceased's funds. If the property is left to someone else then depending on the terms of the will the payments may be paid for out of the property. or if the property is sold out of the proceeds of that property.

    Generally if the will is silent then any loan secured by the property comes comes out of that property. e.g. A borrowed $100,000 to buy shares using 123 smith st as security for the loan. A gives shares to Bob and Smith St to Bill. Who pays the loan? Bill as the property secures the loan. A will not properly considered could means Bill misses out.
     
  3. Shino

    Shino New Member

    Joined:
    26th Nov, 2014
    Posts:
    3
    Location:
    Paynesville Victoria
    If the worst happens with the 99/1% properties, or the ones that are solely in his name but the loan is in joint names and my husband dies, while waiting for the estate to be settled would I be able to use the rental income to pay loan repayments or would the estate take it?
    Our relationship is stable and we have left everything to each other, my concern is how would I pay for the loans while waiting for the estate to settle. He has life insurance but I'm not sure how the bank would look at it.
     
  4. Shino

    Shino New Member

    Joined:
    26th Nov, 2014
    Posts:
    3
    Location:
    Paynesville Victoria
    Sorry I just reread your response and I think I understand now. Thankyou for answering my question.
     
  5. Terryw

    Terryw Well-Known Member

    Joined:
    9th Jun, 2006
    Posts:
    653
    Location:
    Sydney
    Yes you would be responsible for the loan, but don't worry too much. The bank will be understanding and the executor could make an advance payment to you before finalising the estate.