Joint Tenants or Tenants in Common? Why the way you own your property matters for your Estate Planning

When two or more people buy a property together, one of the decisions they will usually need to make is how they will own the property.

For many people, the words joint tenants and tenants in common appear on paperwork during the purchase process and receive very little further thought. After all, you are buying the property together, so does it really matter which option you choose? It can matter enormously. The way your property is held determines what happens to your interest in that property when you die. Importantly, it can also determine whether your Will has any control over the property at all.

At Robbins Lawyers & Conveyancers, we see property ownership and estate planning as closely connected. Getting your ownership structure right when you purchase a property – and reviewing it when your circumstances change – can help ensure your property ultimately passes to the people you intend.

What is the difference between joint tenants and tenants in common?

When two or more people own property together in South Australia, they will commonly hold it as either joint tenants or tenants in common. The major difference between the two relates to what happens to an owner’s interest when they die.

Joint Tenants

When property is owned as joint tenants, the owners hold the property jointly and the right of survivorship applies. This means that when one joint tenant dies, their interest in the property passes automatically to the surviving joint tenant or tenants.

For example, imagine a married couple, Sarah and Michael, own their family home as joint tenants. Sarah dies first. Even if Sarah’s Will says “I leave my entire estate equally to my children”, her interest in the jointly owned home does not pass to her children under her Will.

Instead, because Sarah and Michael owned the property as joint tenants, Sarah’s interest passes to Michael by survivorship. Michael then becomes the sole registered owner of the property.

This can make joint tenancy a simple and effective ownership structure for many couples who intend that the surviving partner should receive the property. However, it is important to understand that the Will does not control the deceased person’s interest in a jointly owned property. The right of survivorship does.

What are Tenants in Common?

Property owned as tenants in common works differently. Each owner has a defined interest in the property. Those interests can be equal, for example 50% each, but they do not have to be. A property could be owned 70% / 30% or in another agreed proportion. Most importantly, there is no right of survivorship between tenants in common.

When one owner dies, their share of the property forms part of their deceased estate and is dealt with according to their Will, or the laws of intestacy if they do not have a valid Will.

Consider Sarah and Michael again. This time they own their home as tenants in common in equal shares. If Sarah dies, her 50% interest does not automatically pass to Michael. Instead, Sarah’s 50% interest forms part of her estate and passes according to the terms of her Will. If her Will leaves that interest to her children, the children may ultimately become the owners of Sarah’s 50% share, while Michael continues to own his 50%.

Neither structure is inherently “better”. The appropriate structure depends upon your circumstances, your relationships, your assets and what you want to happen when you die.

Why does this matter when purchasing property and making a Will?

One of the first things we consider when preparing an estate plan is how the client’s assets are actually owned. It is not enough to know that someone “has a house”. We need to know who is the registered owner, and how the property is held.

This is because a Will can generally only control assets that form part of the deceased person’s estate. If your property is held as joint tenants, your interest ordinarily passes to the surviving joint tenant by survivorship and does not pass under your Will. If your property is held as tenants in common, your interest forms part of your estate and can be dealt with under your Will.

That distinction can fundamentally change an estate plan.

What if you own the property in your sole name?

There is a third possibility that is also important for estate planning, sole ownership. If a property is registered solely in your name, there is no other registered owner to receive it by survivorship. The property will generally form part of your deceased estate and be dealt with under your Will.

Even where your Will leaves the property to your spouse, the property does not automatically change ownership on your death. Your executor will generally need to administer the estate and obtain the necessary authority to deal with and transfer the property.

This is another reason it is important to understand exactly how the title is registered.

Can you change from joint tenants to tenants in common?

In many circumstances, yes. Property ownership can potentially be changed from joint tenancy to tenancy in common. This is commonly referred to as severing the joint tenancy.

However, changing the ownership of property should not be done simply because one structure sounds more attractive than another. There may be legal, taxation, financing, family law and estate-planning consequences to consider. If there is a mortgage over the property, this also needs to be considered as part of the process.

The important thing is that your title and your estate planning should work together.

When it comes to real property, the distinction between joint tenants and tenants in common is particularly important. If you are unsure how your property is currently held, or whether your ownership structure is consistent with your Will and estate-planning wishes, it is worth checking before it becomes a problem that someone else has to resolve.

At Robbins Lawyers & Conveyancers, we work across both property and estate planning, allowing us to consider not only what your Will says, but how your property is actually owned and whether the two work together to achieve your intended outcome.

Because good estate planning isn’t just about having a Will. It’s about making sure everything works together.