Dealing with the loss of a loved one is very difficult. Here are some tips to help simplify the sale of a deceased estate.
The loss of a loved one is an extremely emotional and difficult time. Whether a will was left or not, the legalities that the beneficiaries and executors are left to deal with add extra stress and complexity to the situation. With an emotional time already prevalent, one of the main issues with a deceased estate is deciding if it is to be sold or kept.
Keeping the estate of a loved one can come with a huge cost, both monetary and emotional, and it is because of that reason that many families decide to sell. To help you simplify the processes involved when selling the estate of a loved one, here is what you need to know.
What is an estate
An estate is the financial value of a person that includes their liabilities and assets. The estate can have land, houses, bank accounts, superannuation, investments, and other valuable items. Usually, an executor is chosen as the primary administrator who will act on behalf of the loved one who has passed away. The main tasks involved for the executor include determining the beneficiaries, handling legal matters, and taking responsibility for all assets and liabilities. The executor has the final say on all decisions, which includes selling the deceased’s estate.
Grant of Probate
A grant of probate is a legally binding document that authorises the executor to manage the deceased person’s estate by the wishes stated in the will. Once the executor submits the grant of probate application, the Supreme Court will need to accept it. Once the application is accepted, the executor is therefore legally authorized to act on behalf of the deceased. If the executor waits more than 12 months before filing for a grant of probate, it can be more difficult to obtain this document. Therefore, we recommend engaging with a solicitor to assist.
What is taxed on deceased estates?
The Australian Taxation Office (ATO) has outlined that specific tax rules apply, although these rules can differ depending on the individual situation with distributing the assets of a deceased estate. The ATO highlights several tax concerns that the executor and beneficiaries must handle. Two important tax rules to understand are:
Capital Gains Tax: assets from an estate can be passed on directly to a beneficiary or the executor who will distribute the assets to multiple beneficiaries. The capital gains tax will be paid to the ATO when the estate, executor, or beneficiary disposes of or sells the asset. Executors will have one year to distribute an estate to avoid capital gains tax implications.
The three-year rule: If there is no immediate beneficiary, the estate is treated as a trust and the executor as the trustee where the estate is taxed at individual income tax rates for the first three years after a loved one’s death. If the executor distributes the estate assets to the beneficiaries, the executor does not have to file for a tax return, and the beneficiaries will be liable for tax.
Pick a good real estate agent
Once the legalities of your loved one’s estate are understood, it is time to reach out to a real estate agent who shows great expertise and empathy to guide you and ease any stress. Before the house goes to market, your agent will need to assist the executor by guiding them with any property maintenance and repairs that need to be done, understanding the property's true value and any other costs that may arise through the selling process.
Typically, a property from an estate will be sold through an auction as this process is usually the most transparent and quickest sales method for the buyer and seller. Other sales method options can take much longer with marketing plans and settlement deals extending the process.