Transferring Australian real estate to children! Five ways to transfer real estate to children in Australia

Over time, many parents consider transferring their property to their children. There are five main ways to achieve this: gifting, home loan, will, joint holding and family trust. Each method has its own unique advantages and disadvantages, and it is vital to weigh these factors carefully before making a decision.

1. Give or sell to children

Parents can give the property to their children for free or sell it to them at a price below market value. The advantage of this method is that the children can immediately obtain ownership of the property. However, parents may need to pay capital gains tax (CGT), depending on the purchase price of the property and its value at the time of transfer. Children may also need to pay stamp duty and other additional charges. In addition, if the children receive the property during the marriage, it may be considered community property, which may bring complex legal issues.

2. Loan to children to buy a house (family loan)

Parents can lend money to their children as a down payment or other expenses for buying a property. The advantage of this method is that parents do not have to pay any tax, while the children can purchase the property themselves and pay stamp duty. If the children divorce, the property may not be considered as joint property. However, parents need to consider the terms and conditions of the loan, as well as the repayment ability of their children.

3. Inheritance by will

Parents can leave property to their children through a will. The advantage of this method is that the parents retain ownership of the property until they die, and they do not have to pay any taxes or fees. The children also do not have to pay stamp duty. However, the children do not receive the property until after the parents die, and they will have to pay CGT if the property is sold.

4. Joint ownership

Parents and children can hold the property jointly. The advantage of this approach is that if one of the joint holders dies, their share automatically passes to the other holders. However, loans may require additional considerations and the property may be considered the joint property of the children, which may bring legal risks.

5. Family Trust

A family trust is a flexible legal structure that can be used to hold property and other assets. Parents can transfer property into a family trust and name their children as beneficiaries. The advantage of this approach is that the parents retain control of the property until they die, and the children do not have to pay any taxes or fees. However, stamp duty is payable on transfers into a family trust, and there may be fees to administer the trust.

When deciding how to transfer property to their children, parents should consider their financial situation, their children’s personal circumstances, and their long-term goals. It is important to consult a professional, such as an attorney or financial advisor, to get more information about the different approaches and make an informed decision.

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