In today’s real estate and investment world, there are many different groups of people purchasing properties. You may be investing with a spouse, a friend, a relative or a business partner. You may own property with a new spouse following the death of or divorce from a previous spouse or you may be buying your first property as husband and wife. Which form of ownership, should you be looking at to best suit your needs?
The two forms of property ownership to choose from are either a) “joint tenants” or 2) “tenants in common”. Whilst they sound rather similar, there are major differences between the two structures and not choosing the correct structure could have long-term ramifications.
Joint Tenancy refers to ownership of a property by two or more people. Each owner holds an equal share. If one owner should die, his or her share will automatically go to the other owner (s) irrespective of any provisions made in their will. Instructions in a will cannot override joint tenancy. This form of ownership is commonly used for property owned by married couples and if for example, the husband should pass away, the wife then automatically obtains the husband’s share of the property.
Tenants in Common
Tenants in common is the alternative method for holding property. Tenants in common can be in equal or unequal parts. Should one owner pass away, his or her share of the property can be left to whomever they desire, as set out in their will. If there is no will then it forms a part of the deceased land owner’s estate and will be dealt with under the laws of intestacy.
If nothing adverse happens to the owners of a property during the period of ownership, there will be no problems but if the correct structure is not in place if something unforeseen then occurs, your wishes as to that property may not be upheld. Here’s an example. A woman loses her husband after many years of marriage. She and her husband had owned their home and had two children from the marriage. The children from that marriage were to inherit the property or the proceeds from it on their mother’s death. The woman marries again and she sells the original home. Together with her new husband who also has two children, they purchase another home. In this case, if they purchased the home as joint tenants, if the woman died, her new husband would inherit her share of the property and he may make a will which leaves all of his assets to his children when he dies. The woman’s children have now lost their inheritance. Had they purchased the home as Tenants in Common, each partner could have willed their share of the house to their own children, should they choose to do so. There can be agreements entered into that the remaining partner will continue to reside in the house until their passing and then the estate will be divided according to the will of each of the tenants in common.
Buying property with friends or business partners is another area where the correct decision regarding the form or ownership should be understood. Whilst you may be happy to purchase property with a friend, it does not necessarily follow that you would want them to inherit your portion of the property should you pass away.
In any situation where you are entering into the purchase of such a large asset, not only should you have a solicitor look over the purchase contract for you and undertake the correct searches for that property, but you should also ensure you have an appropriate succession and estate plan in place. Along with the correct form of property ownership and properly thought out and well implemented succession & estate plan will ensure your assets are distributed the way you wish and to whom you wish in the event of your death. Your estate plan should include consideration of a Will, Powers of Attorney and Enduring Guardianship.
Having the legal side of your life in order can make it so much easier for your family in the event of your death. Nobody plans it but it’s an inevitability.
Dooley & Associates will be happy to assist you in making the right decisions, that suit your circumstances in relation to any property transactions and or estate matters.
If you have any questions, please contact our office and one of our friendly staff will assist you with your enquiry.