When you buy a property, you might wonder how you split the ownership generally between you and your spouse.
A lot of factors should be considered when you decide an ownership portion, e.g. income tax and capital gains tax implications and also deceased estate planning for the time when you pass away.
Typically, there are two forms of co-ownership: joint tenancy and tenancy in common. Both sounds similar but the legal consequences are quite different.
As for the joint tenancy, there can be two or more joint tenants. In the joint tenancy you do not have to decided an ownership portion among co-owners because everyone in the joint tenancy has equal interest in the property, e.g. if there are two owners, 50:50 or three owners, 1/3 each.
Also, the principle of ‘survivorship’ applies to joint tenancy. The meaning of ‘survivorship’ is when one of joint tenants passes away, the surviving joint tenant or tenants acquire the whole property automatically by operation of law. In other words, the property held in joint tenancy does not form part of the estate of the tenant who passes away. Therefore a joint tenant cannot in her or his will deal with property held in joint tenancy.
If you hold real estate as a joint tenant you can convert it to a tenancy in common. This needs to be seriously considered in many situations especially where a marriage or de facto relationship has broken down.
As for the tenancy in common, this is another form of co-ownership. The big difference between joint tenancy and tenancy in common is that any share of a deceased tenant in the tenancy in common forms part of the deceased’s estate and passes to his or her beneficiaries under his or her Will.
The next difference is that tenancy in common has fixed undivided shares in the property, meaning tenancy in common can have unequal shares (for example, 2/3 to one and 1/3 to the other).
Therefore you need to carefully consider which is appropriate to your particular circumstances. As always, planning is important well in advance before you invest in something. Should you have any queries in relation to the above two forms of co-ownership, please do not hesitate to call us at (02) 9858 2446. (Financial Genius)