When property is purchased with one or more other persons, a decision needs to be made whether to own the property as joint tenants or tenants in common.
Joint tenants means that:
• You own the property in equal shares
• If one owner dies, then their share automatically passes to the other owner (even if the Will gives that shares to someone else – the will cannot override a joint tenancy).
Tenants in common
Tenants in common means that:
• You can choose to own the property in equal shares, or unequally. For example, if one owner contributes more to the property than the other, shares can be held comparable to the amount contributed.
• If one owner dies, that owner’s Will decides who gets their share (it will not automatically go to the other owner as with joint tenants).
When might you own property as joint tenants?
Joint tenancy is usual between spouses. They hold the property equally and the property reverts to the other on death.
Joint tenancy can revert to tenancy in common by lodging a form at the Land Titles Office, if need be. For example, where a marriage or de facto relationship has broken down.
When might you own property as tenants in common?
Tenants in common is preferable when owners don’t want their share to pass to the other owner/s automatically on death. For example, property bought between business partners would want their share passed to family not the other business partner.
Owning property as tenants in common allows you flexibility to leave property in your will as you wish and not necessarily your co-owner.
Issues to consider when deciding how to own property
It is not always an easy decision whether to buy a property as joint tenants or tenants in common. A few considerations are:
Investment properties – thought as to the appropriate structure, a company or trust may provide better asset protection and tax outcomes.
Asset Protection – If one spouse has exposure to potential risk through litigation or bankruptcy, the low risk spouse could be the more suitable owner of the property.
Estate Planning – to think about long term outcomes of land ownership. Who could ultimately end up with the asset.
Author: Linda Alexander
This article is general information only and should not be relied on without obtaining further specific information.