The property market in New South Wales is the hottest it has been historically, especially in Sydney and its surrounding areas. What does that mean for estate planning? Well, as your property value rises, your estate increases and so does the tax exposure, which can complicate inheritance issues further. We tackle the topic, uncovering how rising property prices will impact your estate planning, inheritance claims, and what you can do to safeguard your family’s interests. 

How Rising Property Prices Impact Estate Planning

Asset Wealth & Estate Value 

Property is generally the largest part of someone’s estate, and when your property value increases, so does the overall value of your estate, potentially pushing it past the tax-free thresholds. It means that a moderate estate could fall into a higher value bracket which could lead to significant disparities among your various beneficiaries. For example, if you sat down with will and estate lawyers ten years ago, you may have left one beneficiary the property and another the movable estate. That could lead to a will dispute. Likewise, the risk of Capital Gains Taxes (CGT) also increases, especially if you can’t claim the main residence exemption.

Capital Gains Tax (CGT) Considerations

Many beneficiaries face CGT consequences when they sell their inherited assets, whether it’s a holiday home or an investment property. If it doesn’t fall under the main resident exemption, there will be a tax liability. 

When does CGT apply? 

  • Upon selling second homes or investment properties
  • Foreign residents 

Though it’s possible to get a partial exemption if an income-producing property was also a main residence, or if it was just a room rented out. 

Estate Liquidity Challenges

A high-value property doesn’t mean that cash is available to equalise inheritance, pay taxes, or pay off debts. The executor is legally charged with paying off debts before they can distribute assets and, in some cases, will sell the property to meet the estate’s obligations. So, a high-value property doesn’t necessarily mean there’s a lot of money in the bank. Executors can face issues when there are multiple properties at different values or one child receives a property while the other receives cash. The executor has to balance this.

Estate Planning Adjustments 

Whether you want to avoid a will estate dispute or beneficiary disappointment, it’s worth revisiting your estate planning regularly. You should revisit your plans after every major milestone, whether it’s a marriage, divorce, or the birth of a child or grandchild. Or, a change in financial circumstances. Due to rising values, a will you reviewed two years ago might not be an accurate reflection of your wishes.

Property Valuation: The Foundation of Estate Planning

Accurate property valuation is key. Not only does it help the executor in their role, but it’s helpful to avoid estate litigation lawyers. Executors depend on accurate property valuation at the date of death for several reasons, including probate, tax reporting, and asset distribution. Probate requires certified valuations to ensure accurate tax reporting for the ATO, but it can also prevent will challenges. An inaccurate valuation could lead to tax shortfalls and uneven asset distribution.

Rising Property Prices & Inheritance Disputes in NSW

Family Provision Claims 

The most common reason deceased estate lawyers have to deal with challenging a will is due to family members who feel they have been improperly provided for. The increase in property prices also increases the likelihood of will disputes because it enhances the asset pool. 

Common Disagreements 

The most common grounds for contesting a will include: a belief that the will is outdated or the intentions have been misunderstood, an allegation of undue pressure or influence to sway the decedent or that the decedent did not have the capacity when the will was made. Many claims are the result of a perceived unfairness in the distribution of assets. 

Executor Responsibilities: Duties and Risk

It is the executor’s responsibility to comply with the legal obligations of the role while carrying out the decedent’s wishes and acting fairly, while ensuring all beneficiaries are informed. Failure to comply with the role’s legal requirements can lead to personal liability, so it’s in their best interests to behave fairly. 

Additional Tax & Legal Considerations 

  • Stamp Duty and Transfer Costs 

Stamp duty isn’t payable on the transfer of the inheritance, but selling the property could trigger stamp duty costs.

  • Estate Administration Fees

There are costs involved with administering an estate, from valuation costs and legal fees to liabilities and taxation, all of which are significantly higher when a property is worth more.

Practical Estate Planning Steps in a High-Value Property Market 

  • Review your will regularly, after life changes and market changes.
  • Consider property structuring options, including family trusts, testamentary trusts, or joint ownership considerations.
  • Clearly communicate your wishes to your beneficiaries so there aren’t any surprises. 
  • Pursue certified property valuations when you update your will.
  • Liquidity considerations, as cash will be required to cover debts, taxes, and equalised inheritances.

How AJB Stevens Can Help With Estate Planning & Inheritance Claims

AJB Stevens are experienced estate and will lawyers who can help you fight an unfair will, whether you believe you were improperly provided for or suspect someone swayed the decedent. We can advise you on your family provision claims, represent you in a will dispute, and guide you through this emotional time. As Sydney locals, we have a profound understanding of NSW laws and can provide tailored advice for NSW residents. 

Every situation is unique, and we will provide a custom strategy to successfully navigate your situation, providing straightforward guidance and support as you make sensitive decisions. We have a solid history of mediating and litigating will disputes and inheritance claims. 

Why Choose AJB Stevens for Your Legal Needs

Estate planning requires thoughtful planning to avoid will disputes that split families, and to avoid tax pitfalls. However, with the rise of property prices, it’s even more important to get accurate valuations and update your will regularly. Always seek legal advice at the earliest possible stage to protect your assets. You reduce your legal risks by working with experienced lawyers like the team at AJB Stevens. 

Looking for advice about an inheritance claim? Contact AJB Stevens to schedule your free consultation today.