What happens to property in the estate

How was the property owned and why does it matter?

The most important factor in what happens to a property after a death is how it was owned. There are two main forms of ownership for couples in Australia: joint tenancy and tenants in common. They work very differently.

Joint tenancy is the most common form of ownership for couples. In a joint tenancy, both owners each own the whole of the property. When one joint tenant dies, the property passes automatically to the surviving owner by operation of law, regardless of what the will says. This is called the right of survivorship. The property does not form part of the estate.

Tenants in common means each owner holds a defined share of the property, which they can leave to whoever they choose. When one tenant in common dies, their share does form part of the estate and is dealt with according to the will, which means probate may be required before it can be transferred.

What do you need to do if property was held jointly?

If the property was held as joint tenants, you need to notify the land titles office in your state or territory to have the title updated to your sole name. This is a relatively straightforward administrative process and does not require probate. You will need a death certificate and the existing title documents or certificate of title.

The specific form and process varies by state. In Victoria it is a Notice of Death form lodged with Land Use Victoria. In New South Wales it is a Notice of Death form lodged with NSW Land Registry Services. Other states have equivalent processes. An estate solicitor or conveyancer can handle this for you for a modest fee, or you can do it yourself using the forms available from each state's land titles office.

Update your home insurance and mortgage to reflect sole ownership. Notify your mortgage lender of the death: they will require the death certificate and may have their own process for updating the loan to a sole borrower. Do this promptly as it can affect insurance validity and loan terms.

What happens if the property was in sole ownership?

If the property was in the deceased's sole name, it forms part of the estate. The executor will need the grant of probate before the property can be transferred to a beneficiary or sold. The land titles office will not process a transfer based on a will alone. Probate is required.

Once probate is granted, the executor can transfer the property to the beneficiary named in the will (using a transmission application or similar form for the relevant state), or sell the property and distribute the proceeds through the estate.

If the property is to be transferred to a beneficiary who intends to keep it rather than sell it immediately, there are stamp duty implications to consider. In some states, transfers to a spouse, de facto partner, or child attract reduced or no stamp duty. In others, duty is assessed at market value. Get legal and tax advice before proceeding with the transfer.

How do you manage a property during estate administration?

During the estate administration period, the property needs to be managed appropriately. If the surviving partner is living in the property, this is straightforward. If the property is vacant, make sure it is insured (some home insurers require notification if a property is unoccupied for more than 60 days), secure, and maintained.

Council rates, water rates, body corporate fees, and any mortgage repayments continue to accrue during the administration period. These are expenses of the estate and are paid from the estate bank account. Keep records of all outgoings during this period for the estate accounts.

If the estate includes a rental property, rental income received after the date of death is income of the estate and may need to be included in an estate trust tax return. Notify the property manager of the death and ensure rental income flows to the estate bank account rather than to any pre-existing personal account.

How does capital gains tax apply to the family home?

The main residence CGT exemption can continue to apply to the family home after a death in specific circumstances. If a beneficiary becomes the owner and the home was the deceased's main residence immediately before the death, the exemption generally applies to any capital gain for up to two years from the date of death, provided the home is not being rented out during this period. The ATO's guide to CGT and deceased estates at ato.gov.au explains the two-year rule and the cost base rules that apply to inherited property.

After the two-year period, CGT may apply to any further increase in value. This does not mean you must sell within two years, but it is a factor worth understanding when making the sell-or-keep decision. Get specific tax advice about the two-year rule and your specific circumstances before making any decision about the property.

For the family home that the surviving partner continues to live in and has transferred into their own name, the main residence exemption continues to apply to their future capital gain as if they had always owned the property. The inherited cost base is generally the market value at the date of death.

How does capital gains tax apply to investment properties?

Investment properties held in the estate do not benefit from the main residence exemption. When an investment property is sold by the estate or transferred to a beneficiary, CGT applies based on the difference between the sale price and the relevant cost base.

For assets acquired by the deceased before 21 September 1999, different CGT rules apply including potential indexation of the cost base. For assets acquired after that date, a 50 percent CGT discount applies if the asset was held for more than 12 months, including the deceased's period of ownership. This discount can significantly reduce the effective tax on a long-held investment property.

The rules are detailed and the dollar amounts involved can be significant. A tax adviser with estate experience should be involved in any decision about selling or transferring an investment property, and should be consulted before the decision is made rather than after.

Should you sell or keep the family home?

Deciding whether to sell the family home is often one of the most emotionally significant decisions in the entire estate administration process. There is no requirement to make this decision quickly, and you should resist pressure from others to do so. The two-year CGT window exists for exactly this reason: it allows time for the decision to be made thoughtfully.

The financial case for selling or keeping depends on your cashflow, your assets overall, the running costs of the property, the direction of the local property market, and the CGT and stamp duty implications of different choices. A financial planner can help you model these scenarios. Do not make this decision on financial intuition alone.

The emotional case matters just as much. The family home carries memories and meaning that are not quantifiable. Some people feel strongly about staying and find the continuity important for their grieving process. Others find that the home has become too large, too expensive, or too full of reminders, and that moving is part of rebuilding. Both are valid. Give yourself the time and space to know which is true for you.