Should I give all my assets to my sister to avoid a will dispute?

3 weeks ago 21

I have a terminal illness and don’t expect to live more than 12 months. I went through an unpleasant divorce nine years ago and the family is still fractured. As a result, I am concerned that my will may be contested. My main asset is my home. I also have some super. Should I transfer my home to my sister, who I trust fully? She is both the executor of my estate and also the primary beneficiary. I am 68 and live off a combination of age pension and superannuation.

First, I’m very sorry to hear of your illness. I hope you can enjoy some happy times in the months ahead. Second, this is primarily a question for your solicitor, so please recognise that my comments are limited to the financial planning realm.

A potentially contested estate can throw up all sorts of problems, none of them with a simple solution.

Centrelink implications are an obvious place to start. In transferring your home to your sister, there is the potential for you to get caught in the gifting rules, inflating your asset test position and harming your pension entitlement. Speak to your solicitor about a granny flat arrangement, which might solve this issue for you.

Potentially more challenging would be the impact on your sister if she was also reliant on the age pension. Upon acquiring your home, she would have significantly more assets under the asset test, yet no associated income flowing from those assets. This would probably have negative implications for any entitlement she received.

Tax is another consideration here. At present, your home is exempt from capital gains tax because it is your primary residence. However, upon transfer to your sister, any growth becomes subject to tax. If this period of time is relatively short, then perhaps that isn’t a major issue, but it’s certainly something you should consider.

Your sister would also probably be subject to land tax on the property. In addition, there would need to be stamp duty paid upon transfer of the property from you to her.

Finally, it would be important to think through what would happen if your sister unexpectedly died before you. It would seem to me that her will would need to be redrafted to ensure you continue to have security of residency in your home.

Again, this is a matter that you should definitely discuss with your solicitor, but hopefully these points help in your contemplations.

I have $300,000 that I am keeping for my three teenage children. I expect to spend this money over the next 10 years, on uni fees, helping them buy their first property, etc. The oldest has already started uni, so the money will start being spent soon. What is the best way to hold these savings? I have them in a high-interest account at present. I have looked at term deposits, and they don’t seem to offer any advantage in returns.

I would consider breaking these savings up into three parcels, reflecting the time frame in which you expect to spend them. Maintain a portion in cash; the high-interest account that you are using makes sense here.

Put another portion into a balanced fund, and the final portion into a growth fund. Balanced funds typically have a recommended timeframe of three years-plus, and growth funds five years-plus.

They will both experience some volatility (thus the recommended minimum time frame), but would be expected to produce higher returns than cash, enhancing the help that you can give your children.

Paul Benson is a Certified Financial Planner at Guidance Financial Services. He hosts the Financial Autonomy podcast. Questions to: [email protected]

Advice given in this article is general in nature and not intended to influence readers’ decisions about investing or financial products. They should always seek their own professional advice that takes into account their own personal circumstances before making any financial decisions.

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