Ownership of property in estate planning – why does it matter?
When taking instructions for preparation of Wills, I often find that clients want to give their house/property as a gift to a certain beneficiary. While this can be a noble gesture, the ownership structure of the property can be crucial as to whether or not, or how, the gift will take effect.
Property owned with someone else – joint tenants or tenants in common
A property which is owned with someone else (or a number of other people) may be owned as joint tenants or tenants in common, and the difference between the two is crucial in estate planning.
Joint tenants
If a Willmaker owns a property as a joint tenant, then:
- Upon their death, the property will automatically pass in ownership to the other owner, and will not form part of the Willmaker’s estate;
- If the other owner dies first, then ownership of the property will automatically pass to the Willmaker.
Owning a property as joint tenants can be useful if the Willmaker feels that there is a risk that someone may apply to the Court for further provision from their estate. If the Willmaker passes away before the other owner, the property will not form part of their estate which will be the subject of a claim for further provision.
Tenants in common
If a Willmaker owns a property as tenants in common, then:
- They can only gift their share of the property under their Will;
- The other share or shares of the property will still be owned by the other owners if the Willmaker passes away;
- If the other owner or owners pass away before the Willmaker, their share or shares will be dealt with under their Will/s or under the rules of intestacy, and the Willmaker may then own the property with a person or people they did not initially intend to own it with.
If a Willmaker wishes to distribute their share of a property which is owned as tenants in common, I always recommend they give serious thought to the consequences of the gift. For example, while it may seem fair to distribute their half share of the home they live in with their current partner to their children from a previous relationship, if they pass away, it may not be very practical for their children to own the property with the current partner.
I want to leave my property to a beneficiary under my Will, what should I do?
If you are considering gifting a property to a beneficiary under your Will, or if you have been gifted a property under a Will and are concerned about the implications of receiving that gift, you should contact an experienced estate lawyer. Please contact me should you require assistance or advice.