When you own property with another person in Western Australia, an important consideration is how that ownership is registered.
Co-owners will generally hold property as either joint tenants or tenants in common. While the distinction may appear technical, it can have significant consequences for your estate planning and, importantly, what happens to your interest in the property when you die.
The key difference is simple: a joint tenancy usually passes the property automatically to the surviving owner, whereas a tenant in common's share generally forms part of their deceased estate.
Joint Tenants
When property is held as joint tenants, the co-owners hold the property jointly rather than each owning a separately defined share.
The most important feature of a joint tenancy is the right of survivorship.
When one joint tenant dies, their interest in the property does not ordinarily form part of their deceased estate. Instead, it passes automatically to the surviving joint tenant or tenants.
The surviving owner can apply to Landgate to record the death of the deceased joint tenant and update the Certificate of Title to reflect the surviving ownership.
For this reason, joint tenancy is commonly used by spouses and de facto partners who intend that their property should pass automatically to the survivor when one of them dies.
Importantly, your Will does not generally control what happens to property you own as a joint tenant. Even if your Will attempts to leave your interest in the property to someone else, the right of survivorship will ordinarily determine who receives the property.
Tenants in Common
When property is held as tenants in common, each owner has a separate and identifiable share in the property.
Those shares do not have to be equal. For example, two owners might hold the property 50/50, while in other circumstances they might own it 70/30 or in some other proportion.
Unlike a joint tenancy, there is no right of survivorship.
When a tenant in common dies, their share of the property generally becomes an asset of their deceased estate. It can then be dealt with in accordance with their Will.
If they die without a valid Will, their interest will generally be distributed in accordance with the intestacy provisions of the Administration Act 1903 (WA).
A tenancy in common may be particularly appropriate for people who want greater control over who ultimately receives their interest in a property. This can be relevant for blended families, business partners, investment properties or co-owners who have contributed different amounts towards a property.
What Does This Mean for Your Will?
The distinction between the two forms of ownership becomes particularly important when preparing your Will.
If you own your home as a joint tenant, you generally cannot use your Will to leave your share of that property to somebody other than the surviving joint tenant. Your interest passes by survivorship rather than under your Will.
If you own the property as a tenant in common, your share can generally be dealt with under your Will. This provides considerably more flexibility in estate planning.
For example, you may wish to:
- leave your interest to your spouse or partner;
- leave it to your children;
- provide a right for another person to continue living in the property;
- place your interest into a testamentary trust; or
- direct your executor to sell the property and distribute the proceeds.
The appropriate arrangement will depend on your personal and family circumstances.
What Does Your Executor Have to Do When You Die?
If the Property Is Held as Joint Tenants
The deceased person's interest ordinarily passes automatically to the surviving joint tenant.
As a result, the property does not generally need to be administered by the executor as an asset of the deceased estate.
However, the death still needs to be recorded with Landgate so that the Certificate of Title reflects the surviving owner or owners.
If the Property Is Held as Tenants in Common
The deceased person's share forms part of their estate and must be administered by their executor or administrator.
Depending on the terms of the Will and the circumstances of the estate, this may involve transferring the deceased's interest to a beneficiary, selling the property, or otherwise dealing with the interest as part of the administration of the estate.
A Grant of Probate or Letters of Administration may also be required before certain dealings with the deceased's interest can be completed.
Can You Change From Joint Tenants to Tenants in Common?
Yes. In appropriate circumstances, a joint tenancy can be severed, resulting in the owners holding the property as tenants in common.
This can be an important estate planning tool.
For example, a person in a blended family may no longer want their interest in the family home to pass automatically to their spouse. Instead, they may wish for their share to form part of their estate so that their Will can provide appropriately for both their spouse and their children.
Changing the ownership structure of a property should not, however, be done in isolation. It may have broader legal, taxation, asset protection and estate planning consequences.
Legal advice should therefore be obtained before changing the manner in which a property is held.
Do You Know How Your Property Is Registered?
Many people know that they own a property with their spouse or another person but do not know whether they are registered as joint tenants or tenants in common.
The answer can usually be determined by reviewing the property's Certificate of Title.
It is particularly worthwhile checking your property ownership when:
- making or updating your Will;
- entering a new relationship or marriage;
- separating or divorcing;
- becoming part of a blended family;
- purchasing an investment property with another person; or
- undertaking a broader review of your estate planning.
How Fort Knox Legal Can Help
The way your property is owned can have a significant effect on who ultimately receives it and how your estate is administered after your death.
At Fort Knox Legal, we can review your Certificate of Title and advise you on how your property ownership interacts with your Will and broader estate planning arrangements.
Where appropriate, we can also assist with severing a joint tenancy, preparing and lodging the necessary Landgate documents, and updating your estate planning documents to ensure that they work together as intended.
If you are unsure whether your property is held as joint tenants or tenants in common - or whether your current ownership structure still suits your circumstances - contact Fort Knox Legal to arrange an appointment with our Estate Planning team.
You are welcome to call us on (08) 9200 1833 or email info@fkls.com.au to arrange an appointment.