How Property Ownership May Affect Your Estate Planning
Joint Tenancy -v- Tenancy in Common
The difference between the two forms of co-ownership is significant from an estate planning point of view because whether or not assets jointly owned form part of the deceased estate will depend on the type of co-ownership.
The two types of co-ownership recognised by Australian Law are:
Joint Tenancy – usually between two or more individuals, each having an equal lifetime ownership interest; and
Tenancy in Common – between both individuals and entities such as companies and trustees and co-ownership does not necessarily have to be equal.
Joint Tenancy
At common law, joint tenancy of real estate is presumed in the absence of contrary evidence. When one joint tenant dies, the interest of the deceased joint tenant passes to the surviving joint tenant(s) who becomes the owner. The most common asset held in joint tenancy is the family home.
Tenancy in Common
When a tenant in common dies, their share passes to their deceased estate and the executor or legal representative deals with that share of the asset in accordance with the deceased’s Will or the laws of intestacy (when there is no Will).
Breaking Joint Tenancy
Joint tenancy can be brought to an end by the death of a co-tenant, but also in the following circumstances:
(a) one of the joint tenants electing to break the joint tenancy;
(b) by agreement of the joint tenants; or
(c) a court order to sever the joint tenancy.
Common Reasons for Severance of Joint Tenancy
There are three common reasons for individual co-owners to break a joint tenancy:
A desire to ensure the surviving co-owner retains eligibility for a means tested pension by not receiving the half interest in an asset, such as a holiday home, when the first co-owner dies.
A desire for a co-owner to leave (or have the right to leave) their share of the joint property to somebody other than the co-owner.
As an interim arrangement between separating domestic partners, prior to entering into a financial settlement for family law purposes.
We can assist if you require advice with respect to co-ownership and how it may affect your estate planning.