One of the most overlooked areas of estate planning is the interrelationship between your Will and any real estate property that you own as a joint tenant.
What is a Joint Tenancy
Osborn in A Concise Law Dictionary (5th Edition) defines a joint tenancy in real estate property:
“The ownership of land in common by several persons where there is a right of survivorship; i.e. where on the death of one joint owner of the land as a whole vests in the survivors, and can only be disposed of by will by the last surviving owner…….” - A Concise Law Dictionary Osborn (5th Edition)
Advantages of a Joint Tenancy
There are of course many advantages to a joint tenancy. One advantage is that upon the death of one registered tenant the ownership of the property passes directly to the surviving joint tenant(s). In order to affect the legal change a simple Application by Survivor, with statutory declaration in support and death certificate is lodged with Landgate. This will avoid the need to apply for a Grant of Probate of the deceased’s Will if the deceased has left no other asset requiring a grant. Where the deceased had intended the surviving tenant to receive the property upon his or her death, then this is an entirely satisfactory result.
Disadvantage of Joint Tenancy
Often spouses and/or partners purchase real estate in their joint names as joint tenants, but do not necessarily intend the other spouse partner to receive their interest on their death. This is often done on the advise of a settlement agent with little consideration being given to the effect this may have on their Wills and testamentary intentions.
This can be particularly important in second or subsequent relationships. A typical scenario is that a spouse and/or partner in a second relationship, purchase real estate together, each contributing one half of the purchase price, (from sources of money often acquired prior to the relationship) and then registering the property in their names as joint tenants. The effect of that is that upon the death of one spouse partner the surviving spouse partner becomes the sole owner of the property. This is often, particularly in second relationships, not what is intended. Quite often, it is the intention that the spouse partner’s interest in the property should, upon the death of a spouse partner, pass directly to the spouse or partners children. In this situation your children will miss out on receiving what could be your major asset on your death.
Changing a Joint Tenancy
There are some options to consider to rectify this if it has occurred to you:
One option, is to sever the joint tenancy. This can be done by simply transferring the property from a “joint tenancy” to “tenants in common’ in equal shares”. The spouse partner can then directly dispose of that half interest under the “Will” to the intended beneficiary. There is only nominal duty (previously called stamp duty) and modest conveyancing costs payable on such a transaction. If there is no mortgage on the title, the transaction is quite simple. It is a little more complicated if there is a mortgage registered and the bank will need to agree to the change and lodge any duplicate certificate of title with Landgate. (There will be some bank fees involved).
Another option, and in my opinion, less satisfactory, is for each of the spouse partners to make mutual Wills whereby they provide for each other’s children upon their deaths and enter into a contract not to change such Wills. The drawbacks with this option are that a subsequent divorce or remarriage will revoke the Will. Further the Will can still be challenged under the Family Provisions Act by a spouse or partner should they change their mind after your death.
Defeating challenges to your Will
However, a joint tenancy, can be a powerful weapon, should you be worried about the possibility or probability of a challenge to your Will under the Family Provisions Act. If the property is currently registered in your sole name but you are married or living with a partner, you can put your spouse or partner on the title with you as a “joint tenant”.
Again, this can be be done with payment of only nominal duty and modest conveyancing costs. if there is a mortgage you will need to get the banks agreement and your spouse partner will probably need to to assume liability with you for the mortgage.(there will be some bank fees involved) However, this is often worth considering as it would mean that upon your death your interest in the property passes by survivorship directly to the surviving joint tenant. It will not form part of your estate and therefore may effectively defeat a potential challenge to your Will ,particularly if this is your major asset.
Further Information and Legal Advice
The area of joint tenancy and its interrelationship with estate planning is potentially complex.
We at EJ Wall and Associates provide legal services in this area. We provide a home visiting service to discuss any issues you have. Our contact details are: phone: 9409 6187 or mobile 04128 910 34.