This article was originally drafted and published on 20 June 2019
One of the most frequent questions I ask my clients during their Estate planning consultations, is whether they know how they hold their real property with their spouse; i.e. as joint tenants or tenants in common. Usually they respond with:
“We’re not sure, what’s the difference?”
In these cases, I use an example which I like to call, the “Toast Example” – totally made up, but it’s so trendy that I’m sure it will catch on…
Think of your home as a slice of toast – whether you like it just warmed or charcoal – it’s yours the way you like it. That aside, imagine you own that slice of toast with your spouse. Now imagine, that you cut the slice in half – your spouse can choose what they want to do with their half; either put Vegemite or smashed avo’ on it, and you can choose what you want to do with your half. Perhaps you were recently diagnosed with gluten intolerance and decide to give your half to your kids instead of your spouse – well, this is what we call tenants in common – you generally have testamentary freedom to gift your share to whom you would like under your Will.
Joint Tenancy is different, it relies on the right of survivorship, meaning the slice of toast isn’t cut in half for you to do what you like with your exclusive piece, but rather, the whole slice is enjoyed by you together with your spouse. When the first joint tenant holder dies, the other will automatically absorb the deceased’s share becoming the sole registered owner of the asset (this process does involve a bit of paperwork though…)
Leaving a gift of property held as joint tenants to someone other than the joint tenant holders will likely be an ineffective disposal of the asset and may cause several complications during the administration phase of the Estate. If you’re unsure which method of ownership suits your circumstances, we would be happy to discuss these concepts further during a consultation – if you’re interested, then please contact our office.
Disclaimer
The information in this article is of a general nature and not intended to be specific legal advice. Please seek the opinion of a qualified professional to advise you of your situation.