Joint Tenants vs. Tenants in Common: Understanding the Impact on Property and Estate Planning
When it comes to property ownership and estate planning in Queensland, the distinction between joint tenants and tenants in common plays a significant role. Understanding the implications of each option is crucial for making informed decisions. In this article, we will explore the differences between joint tenancy and tenants in common, both in terms of property law and estate considerations.
Joint Tenancy: Automatic Transfer on Death
Joint tenancy involves co-owning a property with another person, typically a spouse or de facto partner. In this arrangement, when one joint tenant passes away, their share of the property automatically passes to the surviving joint tenant.
Tenants in Common: Individual Ownership Shares
Tenants in common, on the other hand, allow for ownership shares divided into percentages up to 100. For instance, one person may own 1 out of 100 shares, while the other owns 99 shares. We’ve also seen share structures such at 9 out of 10 shares, 3 people split as 33.3 shares each or 4 people at 25 shares each. It does not have to be an equal ownership, but the total shares must equate to 100. This arrangement allows for flexibility in allocating ownership interests. Unlike joint tenancy, tenants in common can sell or transfer their specific share without affecting the other co-owners' ownership rights. Tenants in common can also be suitable when purchasing property with a friend or through a company for taxation or financial reasons. Understanding the implications of ownership structures is vital to aligning your property purchase and estate planning goals effectively.
Estate Planning Implications:
The choice between joint tenancy and tenants in common has significant ramifications. With joint tenancy, because the transmission is automatic on death, the property is not considered in the will but should be considered overall in the estate planning.
With tenants in common, individuals can gift their specific share of the property to a particular person or even place it in a testamentary trust. This arrangement ensures that the property is distributed according to the deceased's wishes, protecting it from potential claims or changes in circumstances. In situations where concerns arise about potential remarriage or the desire to secure a share of the property for children, tenants in common can be advantageous. It limits the ability of the surviving spouse to deal with the property in a manner inconsistent with the beneficiaries' wishes. Selling a half share of a property can be challenging, safeguarding the intended distribution.
In Queensland, it is possible to sever joint tenancy without the agreement of the other party, effectively converting it into equal 50% shares. Similarly, when two individuals own a property as tenants in common, they have the option to convert it into joint tenancy. These decisions should be made with careful consideration and professional guidance.
Understanding the differences between joint tenancy and tenants in common is crucial for both property ownership and estate planning purposes. Each option has distinct implications that can affect the distribution of property upon death and provide the flexibility needed to align with your specific goals. Seek professional guidance to navigate these matters effectively and make informed decisions that protect your interests.
Given the complexities, it is essential to seek expert legal advice surrounding property ownership and estate planning. At Vicca Law, we are also estate litigation lawyers if you are currently in dispute and in need of some direction. We offer free consultations to discuss your specific circumstances, property ownership concerns, and estate goals. Visit our website at viccalaw.com.au or reach out to us at 0414 193 373 to book your consultation.