Two common types of property co–ownership are joint tenants and tenants in common. These terms may sound similar, but they have significant differences that will affect estate planning and the distribution of assets after one’s death.
Joint tenants
Joint tenants is characterised by the right of survivorship. This means that when one joint tenant dies, their interest in the property automatically passes to the surviving joint tenant(s), regardless of any Will or other estate plans. Joint tenants is often used by married couples or close family members who want the property to pass directly to the remaining co–owner(s) without the complications and costs of probate. This is a strategy often used to remove the asset from the risk of a potential claim against the estate.
Tenants in Common
Unlike joint tenants, tenants in common does not involve the right of survivorship. Instead, each tenant in common owns a specific share of the property, for example, as equal shares such as 50%:50% or as an agreed unequal percentage such as 30%:70%. Upon death, a tenant in common’s share does not automatically transfer to the other tenant(s). Rather, it is distributed according to the deceased’s Will or, if there is no Will, in accordance with the state’s laws of intestate succession.
This form of ownership is preferred by individuals who wish to maintain control over their share of the property after death, for example, such as when each co–owner wishes to bequest their estate to different beneficiaries. The type of co–ownership therefore is particularly relevant in estate planning.
Implications for Estate Planning
The choice between joint tenants and tenants in common can have profound implications for estate planning. It affects how property is passed on to beneficiaries and can significantly impact the estate’s distribution, potentially leading to unintended consequences if not carefully considered.
If you are unsure whether your co–owned property is held as joint tenants or tenants in common it is important that you conduct a property title search. A title search will usually cost around $34.51 and is relatively easy to obtain online.*
Case Example: The Misdirected Inheritance
Consider the case of Maria and her daughter, Elena. Maria owned a house jointly with her sister, Ana, as joint tenants. Maria’s intention was for Elena to inherit her share of the house upon her passing. Unfortunately, Maria did not realise that joint tenants includes the right of survivorship, overriding her personal wishes expressed in her Will.
When Maria passed away, her share of the house automatically transferred to Ana, leaving Elena without any claim to the house. Despite Maria’s intentions, the law governing joint tenants dictated that Ana became the sole owner of the property. This outcome was a source of significant distress for Elena, who lost out on what she believed was her rightful inheritance.
Considerations and Recommendations
This example underscores the importance of understanding the implications of how property is titled. Property owners should carefully consider whether joint tenants or tenants in common better suits their estate planning needs.
Review Property Agreements:
Property owners should review their deeds and agreements to confirm how their property is held and ensure it aligns with their estate planning goals.
A lawyer or conveyancer will be able to assist with obtaining a property title search.
Consult a Lawyer:
It is advisable to consult with an estate planning lawyer who can provide guidance on the implications of each type of ownership and help structure the ownership in a way that best meets your needs.
Consider Changes:
If the current form of ownership does not align with one’s estate planning goals, it may be necessary to retitle the property. This can involve severing a joint tenancy to create a tenants in common arrangement, allowing owners to specify in their Wills how their shares should be distributed. There are other ways in which an interest can be protected. Obtain advice about the options best suited for your needs.
Communicate with Family Members:
Clear communication with family members and potential beneficiaries can prevent misunderstandings and conflicts after one’s passing. If safe to do so, it is helpful for all parties to understand the intentions behind property distribution and ownership structures.
Conclusion:
Choosing between joint tenants and tenants in common is a critical decision in estate planning. Each option offers different benefits and comes with distinct legal implications. By understanding these differences and planning accordingly, property owners can ensure that their estate is distributed according to their wishes, potentially avoiding situations like the one faced by Elena.
Proper legal advice and careful planning are key to ensuring that one’s final wishes are honoured, protecting the interests of all involved parties.
Search can be conducted online via InfoTrack platform. Price current as at May 2024.
Bilson Law is located at Erina. Home visits are available if mobility is an issue. Jacqui Bilson, Principal Solicitor is a passionate advocate for her clients. If this article has raised any questions or concerns for you, please contact the friendly Bilson Law team to schedule an appointment with Jacqui.
Phone (02) 4339 0999 | Suite 4, 210 The Entrance Rd Erina NSW Australia 2250 | bilsonlaw.com.au