Question about division of assets and stamp duty

[Thranker]

Hello

The situation is, the father passed away earlier this year. There are 3 kids and the Will says everything is divided equally amongst them.

The assets are:
a house = $880k
a unit = $550k

One of the kids is taking the house
One of the kids is taking the unit
And one of the kids is being paid out by the other kids

I have spoken with the solicitor and was told that below, perspective 1, is what will happen. But from my reasoning, perspective 2, is literally what will happen.

Perspective 1
The solicitor is saying that House Kid owns a third of the house, a value of $293. Which means they will have to pay stamp duty on 2/3 of the house, that they are buying from the other kids. So House Kid will have to pay stamp duty on $586k of the house.

Perspective 2
But my perspective on this is that each share of the kids total assets is $476k which House Kid is getting from the house. So they inherit $476k of the house and will pay stamp duty only on $404k. I know it will only make a small difference, relatively. But it will still make a difference.

So my question is, can perspective 2 be conveyed and implemented? And if it can, how do we make this happen?

Thanking you in advance for the help.

 

[Rob Legat - SBPL]

This gets a little complicated. There are also some assumptions in here, as all the relevant facts aren’t available. So, consider this general information only:

• The first consideration is whether the trustee of the estate (i.e. the personal representative) has the power of appropriation. This is a state by state consideration. Some have it standard at law (e.g. Queensland), for others it may need to be in the will. This allows the trustee to apply (apportion) various parts of the estate to the beneficiaries.
• The next consideration is what else is there in the estate. This we don’t know, so we’ll work off just the properties.
• The basic outset is as per Perspective 1.
• Equal shares equates to $476,666.67 on the properties. No one property satisfies that.
• Dealing with the house first Trustee apportions the house against Kid 1’s share. That eats up the whole $476,666.67; with $403,333.33 left. Put that against Kid 2’s share. This means the house is owned 54.17% by Kid 1 and 45.83% by Kid 3 (or as close as possible under your state’s titles requirements).
• Next the unit: Kid 1 gets no share, Kid 2 gets their full $476,666.67 (86.67%) apportioned against the unit. Kid 3 gets that balance $73,333.33 (13.33%).
• Each kid gets their respective $476,666.67 (with Kid 3 out $0.01).
• Kid 1 needs to buy Kid 3’s share out, and pay proportionate duty on the purchase. Kid 2 needs to do the same. This will create an imbalance in the duty payable. Kid 1 will pay more. Whether this works out overall I can’t say. Perspective 1 might be fairer overall.
• You’ll need to look at your particular state’s duty requirements as to how this will work out. There should be no duty payable on the initial transfer out to the kids – but from that point there will be duty payable on the transfers between them.

 

[Thranker]

This gets a little complicated. There are also some assumptions in here, as all the relevant facts aren’t available. So, consider this general information only:

• The first consideration is whether the trustee of the estate (i.e. the personal representative) has the power of appropriation. This is a state by state consideration. Some have it standard at law (e.g. Queensland), for others it may need to be in the will. This allows the trustee to apply (apportion) various parts of the estate to the beneficiaries.
• The next consideration is what else is there in the estate. This we don’t know, so we’ll work off just the properties.
• The basic outset is as per Perspective 1.
• Equal shares equates to $476,666.67 on the properties. No one property satisfies that.
• Dealing with the house first Trustee apportions the house against Kid 1’s share. That eats up the whole $476,666.67; with $403,333.33 left. Put that against Kid 2’s share. This means the house is owned 54.17% by Kid 1 and 45.83% by Kid 3 (or as close as possible under your state’s titles requirements).
• Next the unit: Kid 1 gets no share, Kid 2 gets their full $476,666.67 (86.67%) apportioned against the unit. Kid 3 gets that balance $73,333.33 (13.33%).
• Each kid gets their respective $476,666.67 (with Kid 3 out $0.01).
• Kid 1 needs to buy Kid 3’s share out, and pay proportionate duty on the purchase. Kid 2 needs to do the same. This will create an imbalance in the duty payable. Kid 1 will pay more. Whether this works out overall I can’t say. Perspective 1 might be fairer overall.
• You’ll need to look at your particular state’s duty requirements as to how this will work out. There should be no duty payable on the initial transfer out to the kids – but from that point there will be duty payable on the transfers between them.

So they are in Victoria and the properties are in Victoria as well.

One of the kids has been made as sole executor.

Can the executor just decide to give Unit kid the whole unit and give the 2 other kids equal share in the house, if all trustees agree? And if so if one kid buys the other kid out will the stamp duty be on half of the price?

 

[Rob Legat - SBPL]

Short answer: No. The executor doesn't get to change the shares. And any agreement amongst themselves will trigger a stamp duty effect.