Key Point
- Australians do not pay inheritance tax.
- An executor is appointed to help manage the inheritance.
- If you have a will, inheritance will be smoothest. If not, courts may intervene.
When a person dies, all that is left behind becomes a memento. Their assets can be transferred to family, friends and organizations.
“Assets can be anything of commercial value, such as a home, bank account, car, stock, or household item, but they can also be items of emotional value,” said the Victorian Trustee. Melissa Reynolds, Executive General Manager, Membership Services, explains.
“Assets can be gifted specifically. I will give Mr. A my car. For example, I will leave all my property to my children.”
What is an executor?
A will outlines how someone wants their property to be distributed after their death.
In a will, it is known as a legal entity. Enforceris appointed as trustee of the estate. The executor’s responsibility is to carry out the wishes of the deceased and to ensure that all obligations are fulfilled.
An executor can also be a beneficiary.
Florante Abbado, who has practiced as a lawyer in both the Philippines and Australia, said court intervention may be required if an executor is not named.
“The applicant is called a trustee or administrator,” Abad said.
“In other words, the executor is the trustee appointed in the will, and the administrator is the trustee appointed by the court.”
If you have been appointed executor but feel you are unable to manage the duties, you can authorize the state trustee to act on your behalf. This government agency assists with end-of-life issues.
The executor or administrator must contact the beneficiary to apply for “probate”.
Melbourne Supreme Court today issued a broad gag order against Australia over political bribery allegations uncovered by ‘WikiLeaks’ (30 July 2014, Australia) credit: Nigel Killeen/Getty Images
What is probate?
Probate is a court order that validates a will and authorizes the executor to administer the estate.
The Supreme Court will record the application for probate. You can find the Supreme Court Probate Registry for your area.
Who inherits if there is no will?
“When a person dies without a will, it is called ‘intestate,'” explains Melissa Reynolds.
Each state has a statutory formula that specifies who receives what percentage of the estate.
Melissa Reynolds
“The person deemed to have the greatest right to the estate can apply for probate’s leave or authorize a public trustee to administer the estate.”
The method of distributing property without a will is called inheritance law.
Each jurisdiction is different, but usually most of the assets go to the surviving partner and the rest to the children.
If you have a spouse or de facto If the partner has no children, the inheritance belongs to the partner. If there is no partner or children, it will be sent to the next closest relative, as provided by relevant law.
If there is no heir, the inheritance belongs to the state.
Cropped shot of senior couple meeting with consultant to discuss paperwork at home credit: Shape Charge/Getty Images
What are my tax obligations?
Australians do not pay inheritance tax, but other financial obligations exist.
The ATO applies tax rules when selling inherited property.
Akram El Fakri is a Chartered Accountant. “If it was the deceased’s residence, there is no tax on the property of the deceased,” he said.
If you sell an inherited residential property within two years, it is exempt from capital gains tax (CGT), so it is best to seek professional advice.
Shares converted to cash are also subject to the CGT and bank interest from cash inheritance must be declared on the tax return.
inherit property abroad
The same two-year period also applies to overseas real estate.
“If it’s sold within two years and the money goes to Australia, it’s declared, falls under Australian rules and is tax-free,” El-Fakri said.
“The only problem is if the country where it is sold has tax laws specific to it, in which case the transaction will probably get caught in that country’s tax system.”
Special CGT rules apply to non-residents, so we recommend seeking advice.
It is the last will and irrevocable trust legally signed by a 50-year-old woman. credit: Jody Jacobson/Getty Images
Can I appeal the inheritance?
If you think you are entitled to an inheritance, but it is not included in the will or if there is no will, you have the right to object to the inheritance under inheritance law. This is called a Public Family Provided Claim.
The Supreme Court can even change wills.
However, no one is automatically entitled to inheritance. Abbado said he needs to justify his claims.
Since the deceased died and did not provide proper provisions under the will, it is necessary to ascertain the financial ties and how they were dispossessed. There are no hard and fast rules, but the Supreme Court will consider the circumstances surrounding your claim.
Florante Abbado
Inheritance can be complicated, but you can get help through organizations such as: and the . They will provide a list of lawyers in your area who speak your language or who handle deceased estates.
You can also access a free guide to making a will and acting as an executor on your state or territory’s state trustee’s website.