Lianne looks at common misconceptions which arise with jointly owned property and how people can dispose of their shares, if at all.
A misconception that I often come across with clients is that a person is free to dispose of their share in a jointly owned asset upon their death in any way they see fit. In reality, there are vital distinctions to be drawn between the different methods of ownership, with the way in which you own an asset in some instances dictating where it will pass after your death.
In a lot of cases, the main residence will make up the bulk of a person’s estate and it is particularly important to be aware of the two methods of holding a property or land.
Where property or land is held between two or more people as “joint tenants in equity” or “beneficial joint tenants”, the co-owners hold the entire asset together. It cannot be divided into constituent shares and, accordingly, no owner can dispose of their interest in the property alone. As such, if one of the owners dies, their share of such property or land passes automatically to the surviving joint owner(s) on death. This is known as “survivorship”.
Where property or land is held as “tenants in common”, it is treated as a metaphorical pie (cake, pizza… whichever takes your fancy) and can be held in equal or unequal shares (slices!). With a tenancy in common, each owner is capable of disposing of their own share either during their lifetime or on their death.
It is important to think about how you want to own property and how you plan to dispose of such property when you pass away. If property is currently held on a joint tenancy then you are often able to sever the joint tenancy by serving notice upon your co-owners.
Assets, aside from property and land, owned by two or more people are generally held on a joint tenancy and therefore often pass to the surviving owner(s) on the death of any other owner. This is an important factor to consider when looking at assets such as joint bank accounts and jointly owned possessions.
As an asset held on a joint tenancy often automatically passes or “vests” immediately with the surviving owners upon death, it is not possible for personal representatives to vary the joint ownership after death.
However, this is subject to an equitable doctrine known as a ‘resulting trust’ which states that assets or funds provided by a party automatically revert to that party’s estate on death, unless there is evidence to the contrary. Such evidence is often shown by contemporaneous documents at the time when a joint bank account was opened, for instance.
However, it is safer not to rely on equitable doctrines. As such, a co-owner who wants an asset currently held on a joint tenancy to pass elsewhere is best advised to take appropriate steps during their lifetime such as making a will, severing the joint tenancy, drawing up a declaration of trust or other appropriate measures.
That way you can have your slice of cake and eat it!