What needs to be considered when a relative pays off your mortgage?

**I will preface this by saying that all parties are or will be seeking independent legal advice before actually proceeding with anything. I am just looking for some general knowledge at this point.**


A relative has indicated that they wish to pay off the mortgage on our PPOR in a lump sum, sometime within the next couple of years. They are already sorting out the legalities and have lawyers involved on their side, and are actually looking at doing this for a few different family members, not just myself. They basically want to sort out inheritance whilst still alive.

Now as someone who would be in receipt of this gift, what do I need to be aware of? I would love to have the mortgage paid off, but I am wary that it may create other complications that I am ignorant of. How does the ATO veiw someone receiving such a large gift (around 400k)? Is it taxed at all or classed as income? What else do I, as the receiver need to be aware of? I am just anxious that there is some hidden catch I haven't seen yet, and want to go in with eyes wide open.

 

They would have an equitable interest in your property

some of the issues
a) death
b) incapacity
c) divorce
d) bankruptcy

of you or them or spouses.

e.g. they die, someone makes a claim in nsw against their estate and the gift is reversed.

Think whether it should be either
a) a gift
b) a loan at interest
c) interest free loan

instead of them paying your mortgage.

And carefully document whatever you do.

And think of the alternatives such as receiving the gift via their will into a testamentary discretionary trust which has the ultimate tax benefits.