Stamp Duty consequences
It may be that your intentions under your Will are to provide your property to your beneficiaries or is it that you really intend to provide the value of the property to your beneficiaries.
Your decision and directions in your Will may have some serious stamp duty consequences.
Property transferred under and in accordance with your Will is often subject to concessional stamp duty however there are circumstances where full ad valorem stamp duty is payable for transactions where estate property is transferred between beneficiaries.
If you direct under your will that the Executor is to sell your property, they will, as your Executor, undertake the sale and then distribute the proceeds to the beneficiaries.
If one of your beneficiaries wants to buy the property from the Executor, then the purchasing beneficiary will have to pay full ad valorem stamp duty as the Will directs that the Executor is to sell the property. This is notwithstanding that they may have a significant benefit to the net sale proceeds under the Will.
If your Will details that the property is to be transferred to all your beneficiaries, what happens if one of your beneficiaries wants the property and is willing to pay out the other beneficiaries who want to sell?
The purchasing beneficiary will get the benefit of the share of the property due to them under the Will however they have to pay ad valorem stamp duty on the share of the property that they purchase from the other selling beneficiaries.
The stamp duty consequences are particularly applicable where in your Estate you have shares, cash and property to be distributed under your Will in equal proportions to each beneficiary.
The beneficiaries may decide that, for whatever reason to agree to distribute the Estate assets in a different manner. ie they agree to direct the executor to distribute Estate assets that is not in accordance with the Will Eg one beneficiary to take the share portfolio, one beneficiary to take the cash in bank and one beneficiary to take the house.
The beneficiaries taking the share portfolio or cash will not be liable to stamp duty for the transfers between the beneficiaries however the beneficiary taking the property will have to pay stamp duty on the transfer to them of the other beneficiaries interest in the property.
So, when considering how to distribute your estate, careful consideration should be made as to the consequences of the direction provided in your Will as to any property transfers as there may be stamp duty consequences for your beneficiaries or the estate itself.
If you have any questions in relation to the above, please contact our team of Lawyers at The Quinn Group on (02) 9223 9166 or submit an online enquiry form today.