Early inheritance has thorns warns expert
EXPECTATIONS of a parent's inheritance being large enough to help fund a home purchase by their children, can have challenging consequences for all involved.
The tough property markets and increased living costs are fuelling legal disputes over inheritance according to Slater and Gordon estate lawyers.
Their recent research of 1000 Australians aged 16 to 55 and over revealed Gen Y Australians are three times as likely to be counting on an inheritance to buy a house than the Baby Boomers above them.
Slater and Gordon associate Lara 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."
The size of an estate can be a lot smaller than children perceive. Then there can be capital gains tax, mortgages, unexpected gifts and more which can all impact on the size of the pie a beneficiary may ultimately receive, and that's assuming there is no challenge to the will.
"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," Ms Nurpuri said.
You can leave your estate to whoever you wish Ms Nurpuri said, but in each state there are laws that allow a "class of people" to challenge the amount they can receive.
"In every state the children of a deceased person are among that class that can make claims on deceased parents estates. In some states, grandchildren are also entitled to make a claim," she said.
Claims can have a significant impact on the estate as that estate generally carries the cost of any claim, which consequently reduces the amount a beneficiary will receive.
Complications can also occur when a parent doesn't want to wait until after their death for a child to receive funds to help them purchase a home.
"A child might say, 'you don't need to leave me anything in your will, just give me my share now because I want to buy this house', or whatever else it might be," Ms Nurpuri said.
"That can cause huge problems later on because, if they are ultimately left with nothing, that might enable to still make a claim for more.
"So, even if you agree to give them something now, and then give to your other children on your passing, that child that received an early inheritance could always go back, on the parent's death and say 'well, I was left nothing and sure I received an early inheritance, but now I am in a position where I need more money for xyz reasons'.
As there is no way to guarantee your estate won't be challenged, making sure you include in your will all the details of your estate, including any early inheritance arrangements and an explanation of why that has been done, can help reduce the chance of a challenge to your wishes.
Seeking the advice of a lawyer can also help to ensure your will is valid.