Is your property owned as joint tenants or tenants in common?
Where an asset is owned by more than one person or company, it will be owned by them as rather joint tenants or tenants in common.
If a property is owned as joint tenants, each owner essentially owns the whole property. In other words, each owner has equal ownership. So, if one owner passes away, the other automatically receives the deceased owner’s interest.
On the passing of one joint tenant, the property automatically passes to the other, notwithstanding the terms of the will of the joint tenant who died.
A joint tenancy can be severed (ie, converted to a tenancy in common). Each owner can then will their share by making a provision in their will for how the property will be passed.
Tenants in common
Where there are two or more people who own an asset as tenants in common, each owner holds their share of the asset outright. If a tenant in common passes away, their share in the property will be distributed in accordance with the will of the deceased tenant in common. That is, it does not automatically pass to the remaining tenants in common.
Under this ownership structure, the owners may own the property in differing portions, for example A might own 70% and B would own 30%.
John and his brother Sam purchased an investment property together when they were younger as joint tenants. Later, Sam got married. After his marriage, Sam wanted to change the ownership from joint tenants to tenants in common so that his interest could pass to his wife via his will rather than automatically going to his brother.
Severing a joint tenancy or tenancy in common
As there is no change in ownership of the property, transfer duty (stamp duty) is not payable. The only fees in changing a tenancy is the government registration fees.
There can be major differences in the treatment of real property upon a person’s death, depending upon whether their ownership is structured as joint tenants or tenants in common. Therefore , it is important that you are aware of how your property ownership is structured and ensure that it is appropriate for your circumstances.
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