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:
- Your will
- Your enduring power of attorney
- 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
