When planning your estate, understanding how you hold property is crucial. The distinction between joint tenancy and tenancy in common can significantly impact how your assets are distributed after your death.
Joint Tenancy: The Right of Survivorship
A joint tenancy is a form of co-ownership where two or more people have indivisible ownership of a property. The defining feature is 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 the terms of the deceased’s Will.
Estate Planning Implications:
- Not part of the estate: Because the property passes automatically (via the lodgement of the appropriate documents at Land Titles) to the surviving owner(s), it does not form part of the deceased’s estate and cannot be distributed under their Will.
- Potential limitations: This can be problematic if the deceased intended to leave their share to someone else, such as children from a previous relationship.
Important NSW Consideration:
In NSW, the Supreme Court has the authority to sever a joint tenancy, particularly in family provision claims. If the court deems it appropriate, it can convert the joint tenancy into a tenancy in common, thereby making the deceased’s share part of the estate and available for distribution to other beneficiaries
Tenants-in-Common: Individual Ownership Shares
In contrast, tenants-in-common each own a distinct share of the property, which may be equal or unequal.
Estate Planning Implications:
- Can be gifted in a Will: Because each share is individually owned, it can be left to any beneficiary the owner chooses.
- Greater flexibility: This structure is often preferred in blended families or business arrangements where co-owners want to retain control over who inherits their share.
Trusts and Other Considerations:
If there is no trust or other legal arrangement affecting ownership, the share is considered part of the individual’s estate. However, if a trust is involved, the terms of the trust may override the Will.
Choosing the Right Structure for Your Needs
When deciding between joint tenancy and tenancy in common, consider:
- Your relationship with the co-owner (e.g., spouse, business partner, family member).
- Your estate planning goals.
- Potential family provision claims.
- Tax and asset protection considerations.
It’s also wise to regularly review your Will and property ownership structure, especially after major life events like marriage, divorce, or the birth of children.
The way you hold property can have a profound impact on your estate plan. While joint tenancy offers simplicity and automatic transfer, tenancy in common provides flexibility and control. In NSW, the courts can intervene in joint tenancies, so it’s essential to seek legal advice to ensure your estate planning intentions are properly reflected and protected.