Joint ownership of assets is common in New South Wales, particularly for property, bank accounts, and investments. But what happens to these assets when one of the joint owners passes away?
Understanding the legal implications of joint ownership can help you plan your estate effectively and avoid unintended outcomes.
Types of Joint Ownership
In NSW, joint ownership typically falls into two categories:
1. Joint Tenancy
Definition: Both owners hold an equal share of the asset, and no distinct portion belongs to either party individually.
Survivorship Rule: Upon the death of one owner, their share automatically passes to the surviving owner(s), regardless of the deceased’s will.
2. Tenancy in Common
Definition: Each owner holds a distinct share of the asset, which may not be equal.
Inheritance Rule: When one owner dies, their share is distributed according to their will or the intestacy laws if no will exists.
What Happens to Jointly Owned Assets After Death?
The outcome depends on the type of ownership:
1. Assets Held as Joint Tenants
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The deceased’s interest in the asset does not form part of their estate.
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The surviving joint tenant(s) automatically acquire full ownership of the asset.
Example: If a married couple owns their home as joint tenants, the surviving spouse will inherit the entire property upon the death of the other, regardless of the terms of the deceased’s will.
2. Assets Held as Tenants in Common
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The deceased’s share becomes part of their estate and is distributed according to their will.
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If there is no will, the share is distributed under intestacy laws.
Example: If siblings own an investment property as tenants in common, the deceased sibling’s share will pass to their nominated beneficiaries, not automatically to the surviving sibling.
Special Considerations
1. Bank Accounts
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Joint bank accounts usually operate under the principle of survivorship. Upon one owner’s death, the surviving account holder typically gains sole access to the account.
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However, disputes can arise if it’s unclear whether the funds were intended to be shared ownership or held in trust for the estate.
2. Superannuation
Superannuation is not automatically included in an estate and is usually governed by binding death benefit nominations. If a super account is jointly owned (less common), it follows specific rules outlined by the fund.
3. Business Assets
Jointly owned business assets may involve additional complexities, especially if a partnership or shareholders’ agreement exists. These agreements often outline what happens to a deceased partner’s share.
4. Blended Families
In blended families, joint ownership can lead to unintended consequences. For example, a step-parent may inherit assets intended for children from a previous relationship if ownership is structured as joint tenancy.
How to Plan for Jointly Owned Assets
- Understand Ownership Structures: Review how your assets are owned—joint tenancy or tenancy in common—and consider whether this aligns with your estate planning goals.
- Review Your Will: While joint tenancy overrides the terms of a will, tenancy in common allows for flexibility. Ensure your will reflects your wishes for assets held as tenants in common.
- Seek Legal Advice: Consult an experienced solicitor to assess your situation, especially if you own high-value assets, have a blended family, or are a business owner.
- Consider Alternate Arrangements: If joint tenancy does not suit your needs, explore options like transferring ownership to tenants in common or establishing a trust to manage asset distribution.
Final Thoughts
Jointly owned assets can complicate estate planning, especially if their ownership structure doesn’t align with your wishes. Understanding the difference between joint tenancy and tenancy in common is critical to ensuring your assets are distributed as intended.
If you’re unsure about the implications of your asset ownership or need help planning your estate, consult a qualified NSW solicitor. Proactive planning today can prevent disputes and provide peace of mind for you and your loved ones.