Purchasing property? It's time to get your affairs in order

According to a recent article published by smartcompany.com sixty percent of Australians die without a valid will. 

This whopping number includes people who have incorrect wills as well as those who don’t have a will at all.

There are many points in your life when you should review your estate and make sure your affairs in order, and one of these major junctures is the day you purchase your first home.

If you fall ill or pass away unexpectedly in the decades following your purchase then your mortgage could become a suffocating burden to your spouse or loved ones.

So three major points you need to address when buying your home are:

1. Your will
2. Your enduring power of attorney
3. Your insurance

Your Will

It’s vital for anyone above the age of 18 to establish a will, but when you buy your home it becomes even more important.

Whether you have a will or not, if you’re purchasing property you will need to decide on how you want your share of the property to be distributed in the event of your death. On your property transfer document you will need to state whether you and your spouse want to be ‘joint tenants’ of the property or ‘tenants in common’.

‘Joint tenancy’ means your partner assumes ownership of your share of the property after your death. ‘Tenants in common’ means your share makes up part of your estate to be distributed in your will.

Aside from your property there are a range of assets that you need to consider such as cars, superannuation, insurances, and any home contents of significant value.

Many people think that dying without a will (intestacy), doesn’t cause too many dramas, but the government’s distribution of your estate doesn’t always take into account your obvious preferences.

For example if your spouse relies on you for financial support, to meet mortgage repayments perhaps, you might want the entirety of your estate to go towards them.

But the government will look at the broader picture. Do you have step-children? Estranged family members? Ex-partners who might feel entitled to a share? The government will examine these people and might appoint them as beneficiaries.

The best method to ensure your assets are distributed correctly and easily to your chosen beneficiaries is to visit a solicitor and devise a well-thought-out will.

Your Enduring Power of Attorney

While seeing your solicitor you should also establish an enduring power of attorney.

An enduring power of attorney is someone you appoint to make financial and personal decisions in the event that you are no longer able to due to illness or injury.

Not only does this agreement protect you, but it also protects your loved ones from financial hardship in the event of tragedy.

To provide a grim example of how this precaution can protect your family consider the following situation:

You are the primary income earner for your family and the sole owner of several assets such as cars or inherited property. You suffer brain damage in an accident and fall into a coma.

You don’t have any insurance and so your spouse is left to pay for your medical bills, provide for your children and all the while continue to meet mortgage repayments.

If your partner is named your enduring power of attorney they will be able access your assets in order to sell them and meet expenses and remain financially stable.

If you don’t have an enduring power of attorney your loved ones will be left to fend for themselves and in some cases this could mean losing the roof over their heads.

Your Insurance

Before approving your home loan your lender will assess your income and whether you will be able to meet your loan repayments.

In most cases the lender will approve your loan only after considering the combined income of both you and your spouse.

So what happens if one of you can’t work?

Before purchasing your home it’s vitally important to visit a financial planner and look at your insurance options. Some important types of insurance to consider are:

•   Life insurance
•  Income protection insurance
•  Critical illness insurance
•  Temporary disability insurance

You may view insurance as an expense you just can’t afford, however in the real world, tragedies and accidents do happen. It’s important to make sacrifices so that you can hope for the best and plan for the worst.

As finance brokers All About Loans encourage all prospective borrowers to seek advice from both solicitors and financial planners to get their affairs in order.

Because without a plan, your first home could become the source of financial stress, pressure and hardship, rather than a place of fond family memories.

Don Farquharson,

Loan Solution Expert

Owner & Principal Lender of All About Loans