Hey guys Anyone can tell me what the implications are of buying PPOR as tenants in common vs joint tenants? Does this essentially mean that we each get a mortgage via the same lender, and each pay our separate contributions? If a partner dies and leaves their share to a child, does the child have to pay CGT on the inheritance? And if one of us is more likely to get sued than the other, would this arrangement be protective or not? It is so morbid for a Friday night. I am feeling v. stressed about finances today.
Hi Mumeco, Joint Tenants means that your portion of ownership will automatically transfer on your death to the other co-owners without being handled by your estate. Tenants-in-common means that your portion of the asset will be handled by your estate/will. Correctly setting up estate planning is extremely important and not something you should get your conveyancing lawyer to do, you should use the services of a specialist estate planning firm. My wife and I both own our property as joint tenants. We also have one mortgage. If you put it in one persons name, this would protect it from the other partner getting sued. Ironically then you'd have discuss this asset in your /(partners) will. Seriously, go to an estate planning specialist. Cheers, Dan PS Before making an estate planning decision speak to an estate planning specialist.
Names on the loan and names on title are not necessarily the same. Tenants in Common means you own a percentage of the property as specified on the title. For example you may own 50% each, or you may own 75%/25%. Another arrangement suggested by some for asset protection purposes is to put 1% in the name of the at-risk person and 99% in the name of the less risky person. However, while it is theoretically possible to separately mortgage your "share" of the property, in practice the banks are unlikely to want two separate mortgages over the same property because if one defaults, they can't just foreclose on the property to recover their money. Regardless of your level of ownership of the asset, they will want you both to be jointly and severally liable for the loan (meaning they can go after either one of you for the entire amount outstanding, regardless of who actually owns what). The main difference with Tenants in Common is that you can separately will your partial ownership of the asset - meaning that if you die, your 50%, 25%, 1%, 99% or whatever, can be passed on to whomever you designate in your will. Joint Tenants means you own things equally - everything is split evenly between the owners. This is the simplest form of ownership, there is no question about who owns what - it is equal. The difference is again if one of the "tenants" (owners) dies, then ownership automatically passes to the other owners - regardless of what may be specified in a will. This has implications for people who die and then their spouse remarries - since the children or family of the person who died get effectively cut out from ownership - indeed, it is conceivable that the children of the subsequent spouse are the ones who ultimately benefit from the asset, rather than the original children of the person who died. I don't know about taxation of inheritance - I'll have to leave that one to the accountants. As a simple form of asset protection, you could put the asset 100% in the low risk persons name - but there comes a question of who actually owns the asset then, since legally their name is the only one on the title (and you'd have to fight things through the courts to argue that you contributed all the money, so you had a defacto interest in it, regardless of title ... not an easy thing to prove). But the alternative is to perhaps put 1% in the high risk name and 99% in the low risk name - so at worst you stand to lose your 1% ownership of the asset (not sure of the implications if you do lose that 1%) ... and more importantly, you get to stop your spouse from selling the property and running off with the money, since they only own 99% of it These things are not easy. Most common seems to be is Joint Tenants, mostly because the title is much simpler (no percentages to specify), but that is not necessarily the best choice - depending on circumstances. Professional advice is really required to understand your own situation (risk, marital situation, children, wills, etc etc), and to have the implications fully explained.
Estate planning specialist? Thanks guys. So I agree that planning the purchase is really important. Do you have any estate planning specialists in mind?
For structuring your investments up front, our own NickM from [aff]PSWMCL1[/aff] is one of the best that I know - he is an expert in investment structures. For dealing with other end - estate planning and wills, I've used Ray from Ward Legal (no relation to our Nigel), and found him to be extremely helpful and great at explaining how wills and testamentary trusts work.
