TAX TIP #40: | JOINT TENANCY | WILLS

Facts

Mum and Dad are married, Mum has one child from a previous relationship.

They own their home as joint tenants.

Mum has prepared her Will providing that her share in the home will go to her child.

Question 1

Upon Mum's passing, will her share of the home go to her child?

Answer

No.

Question 2

Which prevails, the joint ownership or Mum's Will?

Answer

Joint ownership*.

Tax Tip

Where property is held as joint tenants, all joint tenants have an equal interest in the property and the right of survivorship exists. The right of survivorship provides that if one joint tenant dies, the property will automatically pass to the surviving joint tenant(s). It will not form part of the deceased's estate and will not be distributed in accordance with their Will (unless the person is the last surviving joint tenant at the time of death i.e. the sole owner).

Upon Mum's passing, the right of survivorship will apply and the property will pass to Dad as the surviving joint tenant. The home will not form part of her estate and her intended beneficiary (her child) will not receive their interest.

In order for Mum to achieve her intention, Mum and Dad need to hold their respective interests as tenants in common. A tenant in common can give their interest in property by Will as there is no right of survivorship.

*Note - if the property is in New South Wales, a New South Wales court may still treat the property as if it were held as tenants in common.

Ownership of property can be changed from joint tenants to tenants in common and vice versa. However, it is important to obtain legal advice to ensure no duty is payable in your State and that the change in tenure is completed as part of an estate planning strategy that fits the client's needs.

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