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Reverse Mortgage - Rights to Sell Property Bought before Marriage?

Discussion in 'Property Law Forum' started by Concernedchild, 16 October 2014.

  1. Concernedchild

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    Hello,

    I am hoping that someone may be able to help. My Mother-in-Law (MIL) owned her house (in Melbourne) outright before remarrying. Her 2nd husband came to the marriage with nothing and it has been quite apparent that he has also contributed very little to the day to day bills since then.

    The problem: She is 82 and he is 84 and they do not like each other very much any more. They will not separate or divorce but neither of them are capable of looking after each other due to failing health even though the husband receives a carer's pension The husband has many adult children and none of them have treated my MIL very well over the years and especially of late.

    My MIL has changed her will recently to remove a power of attorney from her husband and make my husband and his sister joint executors and joint power of attorney's to try to ensure that her wishes are carried out should she pass away first. Those wishes include that her house goes equally to her 3 children with the provision that he may live in the house until his death providing he does not take on other woman and that his children do not move in, and other property such as antique furniture and cash. She does make a provision for some cash for him.

    She has been advised by her new solicitor that her wishes would not stand up in court and that should she die first her 2nd husband would receive the full estate. Also, that should he die first and she second, his children could challenge her will.

    She is beside herself with worry now because she does not want any of her estate to go to her husband's children nor does she want to have any of them living in her house ever.

    She is now looking at her options on how to deny them any chance of this while she is still alive. They are:

    1.Selling her house and gifting the proceeds to her three children probably in the form of term deposits so that access will be available to take care of her aged care and housing.


    2. Accessing equity in the home via reverse mortgage.

    She is leaning more towards option 1 at this stage.

    My question is, does she have the right to sell or mortgage her property and gift the proceeds to her children whilst she is living without any consequences?

    Any advice would be appreciated
     
  2. Victoria S

    Victoria S Well-Known Member

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    Hi @Concernedchild
    I agree with her new solicitor's advice. See the other threads in this Family Law Forum that have similar responses.
    She should sort this out now while she's alive. Ideally they'd divorce and get a property settlement, so his kids (and her husband if he survives her) don't try to challenge her will. See the Family Law Courts "Property and Money Matters" page.
    Gifting now would address some issues.
    I would seek further advice from her lawyer.
     
  3. Sophea

    Sophea Well-Known Member

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    Hi @Concernedchild,

    As Victoria S has advised above, seek further advice from her lawyer with regard to this as the best course of action will depend on the specific circumstances of your mother's situation.

    There are however a few things you should know about pre death gifting of cash and assets. While it can in certain circumstances be effectively used to distribute assets prior to death, so that those assets do not form part of the estate from which certain people can seek to claim provision, when it is clear that the distribution was made for this purpose, the court can "claw back" the assets into the estate. Distributions made less than 12 months before the death of the deceased which are made as a "gift" may be drawn back as part of what they call the notional estate if when the gift was given the deceased had a moral obligation to make adequate provision for another eligible person; and the moral obligation was greater than any moral obligation to give the gift.
    If the distribution is made more than 1 year, but less than 3 years prior to the death, it must be proved by anyone challenging the estate, that the asset was the subject of a transaction that was specifically intended to avoid a family provision claim. Distributions made more than 3 years before the death of the deceased usually aren't at risk of claw back.

    In addition, the testator must make it clear that any distributions made while they are alive are above and in addition to any testamentary gifts that are to be made through their will after they die. Otherwise a court may decide that a specific beneficiary has already received their gift while the testator was living.

    Again, seek specialist advice from your mother's lawyer about this and ensure you structure her distributions properly to reflect her wishes.
     

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