Legal Tip 245: The Two Ways to Jointly Own Property – Joint Tenancy v Tenants in Common

When two or more people buy property together, they must decide which way they will jointly own the property.

The two ways are either:

a) As Joint Tenants, or

b) As Tenants in Common

The main difference being that when a Joint Tenant dies, their interest in the property passes to the other owner(s), but when a Tenant in Common (TIC) owner dies their share of the property passes via their estate which will meant he will or the intestacy laws will determine who inherits.


Example

Bart and his dad, Homer, by an investment property together. They give little consideration to how to own it and it ends up being registered as Joint Tenants.

Bart is single at the time.

A short while later Bart gets married and has children.

Sadly, soon after his 3rd child is born Bart dies in an accident.

Bart’s will says that his spouse gets everything.

But Bart’s investment property does not pass via his will, it passes to the surviving owners – Homer in this case.

Homer might not like Bart’s wife so he may not care she doesn’t get the 50% of the property that she would have had it been held as tenants in common. He might be happy. But Homer might decide he wants her to have 50% of the property. This would trigger both stamp duty and CGT on the transfer of 50% to Bart’s wife.


But sometimes it can be beneficial to own a property as Joint Tenants so that there is no discretion.


Example

Maggie enters into a relationship with a man who has multiple children from 4 previous relationships. Maggie and her spouse buy a new property. Maggie figures due to his advanced age she will likely outlive him. She suggests they own the new house as Joint Tenants so that if the spouse dies, she will inherit automatically no matter what his will says. If his family contests the will it won’t matter if the will is invalid on not.



Note that there are still ways a joint tenancy property could be challenged on death. I might cover these at some future date.

 

Or the two parties may use some other mechanism that defines the arrangements which may also create other estate planning issues
- Fixed Unit Trust
- Unit Trust
- Hybrid Disc Trust
- Hybrid Unit Tust
- Class Disc Trust
- Testamentary Trust where on death the asset passes to a trust and not to the estate of the deceased
- Bare Trust and other forms of trust
- Company that issues shares
- Superannaution fund (SMSF) with individual member interests that may be either a segregated or a non-segregated asset and may be subject to a recessionary pension or not. Many forms of superannuation interest dont also pass to the estate but may, or may not.

In each of these the deceased person may merely hold a right as a beneficicary or shareholder. On death their rights may not be as literal as a joint tenancy or a TIC

All need legal advice to ensure the estate mechanism and entitlements are defined. Its fine to hold shares in a company but on death a shareholder's legal personal representative may be unable to demand the property be sold or that the shares be acquired.

 

Hi @Terry_w great post! Now we’re eyeing on TIC between me and my partner to protect our daughter. Any downfalls with choosing TIC over Joint tenancy? Solicitor it’s TIC is more complicated and wouldn’t matter if one gets bankrupt etc? TIA

 

Downside is wills and estates can be challenged. JT means it bypasses estate, but still not completely safe.

 

If we’rebuying a property under TIC, should I speak to the same solicitor to make our wills? Or a different one who specialises in this? Are we able to seek your services? Thanks

 

If the solicitor thinks being JT won't matter if you become bankrupt I wouldn't be speaking to them about wills...
If a joint tenant becomes bankrupt the joint tenancy is severed and they become Tenant in Common owners in equal shares. but it should be obvious that if someone dies just before their partner becomes bankrupt the partner would lose the whole house rather than just 50% of it if was held as joint tenants.
We generally only do complex wills incorporating testamentary discretionary trusts. If you email me I can send you our wills brochure which shows why you should consider a TDT will.

 

Ok I’ll
Message you my email address now.

 

Can this be changed post-purchase or does it incur stamp and all the other “sales” like trouble with adding / removing a name from a title?

 

Yes can be changed relatively easily and doen't trigger CGT or stamp duty unless the tenants in common were or become unequal owners.