When looking at purchasing property with a spouse or de facto partner a question that has to be answered is whether the property will be owned as joint tenants or tenants in common. What does this mean, and why should you care?
Both options give each party ownership rights and a share of the property. However, the main difference is what happens on the death of one of the tenants.
- If you own property as joint tenants each party will own 100% of the property jointly.
- On the death of the first to pass away, the survivor receives a right of survivorship. This means the property will automatically transfer to the survivor.
- If parties separate, one party may consider severing the joint tenancy (which will then change the tenancy to tenants in common).
Tenants in Common
- If you own property as tenants in common, you will own the property in the % shares decided upon (i.e 50/50). This gives each owner a fixed entitlement, separate from each other.
- On death of the first to pass away, the % share owed will have to be dealt with in accordance with the terms of the deceased will or if the deceased has no will, the distribution of the % share will be governed by the laws of intestacy. If you intend for your spouse/de facto (co-owner) to remain living in the property after you pass away you should consider drafting a will that gives your loved one (the co-owner) a right to reside in that property.
- On a separation each of you own the % share of the property outright which can assist in any property settlement negotiations.
- Couples can make a financial agreement before, during or after a marriage or de facto relationship. These agreements can cover:
- financial settlement (including superannuation entitlements) after the breakdown of a marriage or a de facto relationship
- financial support (maintenance) of one spouse by the other after the breakdown of a marriage or a de facto relationship,
- any incidental issues.
For a financial agreement to be legally binding, you must both have signed the agreement, and received independent legal and financial advice before signing.
If you need any assistance with structuring your next purchase, contact C Legal & Co today