Understanding the Difference Between Joint Tenancy and Tenants in Common
When venturing into the realm of property ownership, especially in collaboration with others, it’s crucial to make informed decisions right from the start. The terms “joint tenancy” and “tenants in common” might sound similar, but they carry distinct legal implications that significantly impact your rights and the fate of the property, especially in the event of a co-owner’s death.
Let’s delve into the intricacies of these two types of ownership and explore the considerations that should guide your choice.
Types of Ownership & The Division of Property
Joint Tenancy vs. Tenants in Common: An Overview
When purchasing property, the choice between joint tenancy and tenants in common profoundly influences how ownership is structured. These two types of ownership have distinct rules regarding property division and succession.
While both provide co-owners with ownership rights and a share of the property, the key difference lies in the rules governing the death of one of the tenants.
What is Joint Tenancy?
In joint tenancy, co-owners, which can include more than two individuals, collectively own the entire property. They do not specify percentages; instead, each owner holds 100% jointly with the other. Married couples often opt for joint tenancy due to its “right of survivorship.” This means that upon the death of one joint tenant, the deceased’s share automatically passes to the surviving tenant(s) and does not become part of the deceased’s estate.
Benefits of Joint Tenancy
One of the primary advantages of joint tenancy is the automatic right of survivorship. This simplifies the transfer of ownership upon the death of a co-owner, often making it less complex and less expensive compared to tenants in common.
What is Tenants in Common?
In contrast, tenants in common own specific shares of the property, and these shares can be equal or unequal. Parties who are not automatically entitled to a right of survivorship, such as friends or siblings, usually choose tenancy in common. Upon the death of a tenant in common, their share becomes part of their estate and is distributed according to their Will or the laws of intestacy.
Benefits of Tenants in Common
Tenants in common offer flexibility in ownership percentages, allowing unequal shares based on individual financial contributions. This flexibility is particularly useful when parties are contributing unequally to the property purchase.
Equal or Unequal Shares
Joint tenants always own equal shares, and if unequal shares are desired, tenants in common is the appropriate choice.
Considerations Before Choosing Between Joint Tenancy & Tenants In Common
Factors Influencing Your Decision
When deciding between joint tenancy and tenants in common, several factors should guide your choice. Consider the nature of your relationship, whether you’re in a long-term marriage, a new couple, or part of a blended family. Additionally, the financial contributions of each party and their preferences for inheritance play a crucial role.
• Married or Long-Term Relationship
Joint tenancy is often the preferred option in a committed and long-term relationship. The right of survivorship ensures a seamless transfer of ownership to the surviving spouse, simplifying the inheritance process.
• New Couple: Not yet married or only been together for a few years
For couples in the early stages of a relationship, tenants in common might be a more suitable choice. This allows flexibility in determining ownership percentages and ensures that each party’s share is distributed according to their Will in case of death.
• Blended Family: A remarried or de facto couple, with children from a previous partner
In situations where there are children from previous relationships, tenants in common provides a way to account for individual interests. Each co-owner’s share can be specified in their Will, avoiding complications in inheritance.
The choice between joint tenancy and tenants in common is a pivotal decision that goes beyond simple property ownership. It shapes the way your property is passed on, reflecting your relationships, financial contributions, and individual preferences. Understanding these options empowers you to make choices that align with your values and plans.
The Importance of Seeking Legal Advice for Your Circumstances
Navigating the complexities of property ownership requires careful consideration of legal implications. Seeking legal advice tailored to your specific circumstances ensures that you make informed decisions aligned with your goals and preferences.
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