If you co-own property with another person, such as your spouse or another relative, when taking steps to plan your estate it is essential that you consider whether this property is held as joint tenants or tenants in common.
Different types of co-ownership
In circumstances where two or more people own an asset (such as property) jointly, the asset is held 100 per cent in all names and is called joint tenancy. Spouses frequently place the matrimonial home in their joint names as joint tenants. In the case of business partners, it is also common for partnership assets to be held as joint tenants.
Tenancy in common occurs in circumstances where two or more people own an asset however each person owns a specific share of the asset. For example, a husband and wife may own 50 per cent of the matrimonial home each.
Irrespective whether co-owners are joint tenants or tenants in common, each is entitled to the possession and enjoyment of the land.
The rule of survivorship
Importantly, the rule of survivorship provides that where property is held between two or more people as joint tenants, the interest of the deceased person passes directly to any surviving joint tenant or joint tenants. This is the case regardless of what is stated in the individual’s will.
For example, if a brother and a sister own property as joint tenants, and the brother states in his will that he wants his interest in the home to be passed to his wife upon his death, the interest in the home will pass directly to his sister rather than to his wife. This will happen even if the brother expressed an intention in his last will that he wanted his wife to be provided for upon his death by receiving his interest in the property.
Where property is held as tenants in common, on the death of one of the owners, that person’s share passes to his or her estate and is distributed according to the will. The share does not pass directly to the surviving owner, as is the case with joint tenancy.
Why this is important for your estate planning
Whether it is the better option to hold real property as a joint tenant or a tenant in common entirely depends on what your intention is, and more specifically, who you intend to take ownership of the particular asset in the future.
There may be several reasons why it may be appropriate to hold your property as a joint tenant, for instance, you may want the surviving owner (most commonly a spouse) to receive the asset.
Specifically, if the asset is a matrimonial home, you may want to ensure that your surviving spouse has somewhere to live.
Importantly, you may wish to minimise the amount of property that forms part of the estate, particularly if you are concerned that your will may be challenged. If the property is held as joint tenants it will not form part of the estate and is not vulnerable to any family provision applications.
However if you want your interest in co-owned property to pass to a different person, then it is important to ensure that your interest is held as a tenant in common.
Using the example above, if the brother wanted his interest in property to pass to his wife, the joint tenancy between the brother and sister should have been severed to create an interest as a tenant in common.
Severance of joint tenancy
The right of survivorship may be extinguished during the life of the joint tenant by severing the joint tenancy.
In Queensland, joint tenancy may be unilaterally severed by registration of a transfer. A copy of the transfer instrument must be given to the other joint tenants. Joint tenancy can be severed by either of the joint tenants, and there is no requirement that the other joint tenant must agree to this.
After severance, each person will hold their interests in the property as tenants in common.
How we can help
If you are not sure whether your property is held as joint tenants or tenants in common, you can check this by performing a titles search on the Queensland Government Website.