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Estate battles emerge as Gen Y Australians rely on inheritance to break into the property market

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Tough property markets are fuelling legal disputes over inheritance according to estate lawyers, with new research revealing Gen Y Australians are three times as likely to be counting on an inheritance to buy a house than the Baby Boomers above them.

A survey of 1,000 Australians commissioned by Slater and Gordon Lawyers revealed one in four (26 per cent) of Gen Y Australians said they had, or would need to, rely on an inheritance windfall to purchase the home they wanted.

This compared to just eight per cent of Baby Boomers who said they had, or would, need an inheritance to break into the property market.

Unsurprisingly, this trend is the most pronounced in New South Wales, where 23 per cent of respondents said they were banking on an inheritance.

 

 

 

 

 

 

 

 

 

 

 

 

 

Property pressures and inheritance disputes

Slater and Gordon Associate Lara Nurpuri said this trend is creating tensions within the family dynamic when it comes to inheritance.

“There’s no question that Australia’s housing market is tough at the moment, especially in capital cities, with a significant proportion of the next generation priced out,” Ms Nurpuri said.

“What we’re increasingly seeing in some situations is children counting on an inheritance from their family to give them the deposit they need to break into the market. “However, we’re also seeing some people who count their chickens before they’ve hatched and don’t get as much as they were expecting, while some even ask for an early inheritance. “We have seen many instances where this has prompted family members to challenge their siblings or other relatives for a bigger piece of the pie, or created tensions that have led to estrangements where inheritances are reduced or children are cut of wills completely.”

Can parents ‘rule from the grave’ when it comes to inheritance?

Ms Nurpuri said everyone has the right to leave their estate to anyone they like, but that does not stop children or other relatives from successfully challenging a will. “Every state and territory has laws that stop parents ‘ruling from the grave’,” Ms Nurpuri said.
“These laws allow children who have suffered estrangement or exclusion to make a successful claim on their parent’s deceased estate, depending on the circumstances.
“The categories of people who are eligible to challenge a will (usually close relatives) and the satisfactory reasons for doing so vary in the different state and territory jurisdictions, so it’s always a good idea to get legal advice about the specific laws that apply.”

I received an early inheritance before my parent passed away, can it be challenged?

Ms Nurpuri said ‘empty estates’ where assets have been disposed of prior to death cannot usually be challenged, but New South Wales has a very unique law in this area.

“The concept of ‘notional estate’ exists in New South Wales and it allows courts to call back assets that were given out before a person’s death and redistribute them as if they were part of the estate,” Ms Nurpuri said. “This means that even if your parents agree to give you an early inheritance to help you buy a house, your siblings or other relatives could still challenge this at a later date.

“However, some strict time limits apply to notional estate challenges:

  • If the early inheritance occurs within three years of the person’s death, an intention to deny or limit the inheritance of the challenger would need to be established.
  • If the early inheritance occurs within one year of the person’s death, a moral obligation to provide for the challenger would need to be established, and it would need to be greater than the obligation to the person who received the early inheritance.

Ms Nurpuri said extreme caution should be exercised with regard to notional estates and early inheritances.

"While the law currently only exists in New South Wales, it could apply if the estate in question has a sufficient connection to New South Wales,” Ms Nurpuri said.

“For instance, if the property was located outside New South Wales, but the deceased person lived in New South Wales, or vice versa.

“Additionally, the type of assets that are considered a ‘disposal’ for the purposes of a notional estate are very broad.

“The Succession Act covers any act or omission that results in a change of ownership, so failing to do something can also fall under notional estate.

Some examples are:

  • Transferring of assets for less than market value (e.g. selling a house to a sibling for less than the property is actually worth);
  • Failure to sever a joint tenancy.

Listen to Lara talk about inheritance and the property market: