Understanding Property Ownership Types

Understanding Property Ownership Types
 

There are mainly two types of property ownership: Joint Tenancy and Tenancy in Common, with each having significant distinctions. Upon purchasing a property, its ownership type is specified on the transfer document. Joint Tenancy is noted for the right of survivorship; this means that if one owner dies, their share directly transfers to the remaining owner(s), overriding wills or separation agreements.

Conversely, Tenancy in Common permits the distribution of each owner’s property share according to their will, without an automatic right of survivorship.

Recognising the differences in ownership structures is crucial for several reasons, including considerations for taxes, estate planning, and safeguarding assets. Often, purchasers of property might not fully grasp the implications of each ownership structure, leading to a desire for changes that come with substantial costs. Relationship alterations frequently necessitate ownership adjustments.

Changing Ownership

It is possible to change ownership types, but such changes can incur tax implications. Specifically, altering property ownership often triggers Stamp Duty expenses in New South Wales (NSW), calculated on the property’s market value at transfer time. For example, a switch from Joint Tenancy to a single owner for a property valued at $1.5 million could lead to an approximate Stamp Duty of $28,000, barring exemptions.

Estate Planning

To align estate management with personal wishes posthumously, individuals might change their property’s ownership type. Transitioning from joint tenancy to tenancy in common allows an owner to dictate their property share’s distribution through their will, offering more control over their estate.

Relationship Changes

Changes in personal relationships, such as marriage or entering a de facto partnership, might prompt the addition of a spouse or partner to the property title, shifting the ownership to either joint tenancy or tenancy in common. Similarly, separation or divorce could require removing a spouse or partner from the title. In NSW, property transfers between partners, whether married, separated, or in de facto relationships, may qualify for stamp duty exemptions.

Financial Considerations

Owners might also modify their property ownership type for tax optimisation, investment strategy alignment, or asset protection. Shifting to tenants in common, for example, allows for specifying different ownership shares, possibly offering tax benefits or aligning with individual investment preferences. Strategic financial planning might necessitate such changes for enhanced tax efficiency or investment outcomes.

Other Factors

Several other considerations can influence ownership changes.

Under the NSW Succession Act, the court can include a deceased’s ‘notional estate’—property controlled or benefitted from before death—in family provision claims, potentially affecting joint tenancy properties. Additionally, severing joint tenancy following a relationship breakdown can clearly define and protect each party’s interest, often a strategic estate planning move to ensure assets are distributed as desired, circumventing the automatic transfer inherent in joint tenancy laws.

In the context of family law, in the aftermath of a relationship breakdown, it may become necessary to sever this joint tenancy to ensure that each party’s interest in the property is clearly defined and protected and may prevent improper dealing of that property. In the broader context of estate planning following a relationship breakdown, severing joint tenancy is often a strategic step to ensure that assets are distributed according to the party’s wishes. It is a preventive measure against the risk of significant assets, like the family home, bypassing the intended estate plan due to the operation of joint tenancy laws.

Process

In NSW, changing property ownership involves legal steps, including completing specific forms for the Land Registry Services and potentially dealing with Revenue NSW for stamp duty matters. Consulting legal and financial professionals is essential to navigate these changes legally and effectively.

Changing tenancy is a significant decision with profound implications for property rights and estate planning. Individuals considering this should seek legal and financial advice to understand the implications fully and ensure that their interests are protected.

Disclaimer

This information is provided for general informational purposes only and should not be considered legal advice. Property ownership and its implications can vary significantly depending on individual circumstances, legal jurisdiction, and changes in law. It is crucial to consult with a qualified legal professional to understand the specific implications of your situation. Do not rely on this information for making legal decisions. Seek personalised legal advice to ensure your decisions are informed by the most current legal standards and practices and are suitable to your situation.

The Importance of Having a Will in New South Wales

THE IMPORTANCE OF HAVING A WILL IN NEW SOUTH WALES

It’s crucial to pause and think about the future. One of the most significant steps in future planning is drafting a will. While many might consider it a task for the distant future, the intricacies of estate law highlight its immediate importance. Here’s why everyone should have a will:

Protection of Assets in NSW: Sydney’s dynamic property market means many residents have significant assets. Estate law in NSW ensures that, with a valid will, these assets are distributed according to your wishes, safeguarding against potential disputes among beneficiaries.

The Consequences of Intestacy in NSW: Dying without a will in NSW results in an intestate estate. The Succession Act 2006 (NSW) then dictates the distribution of assets, which may not align with the deceased’s wishes, leading to potential family disputes as well as increased costs.

Efficient Probate Process: A clear and legally sound will can expedite the probate process in NSW. It provides clarity to executors, ensuring assets are distributed without unnecessary legal complications.

Charitable Contributions: A will allows a person to leave a legacy in the form of charitable donations, ensuring their philanthropic desires are met under NSW law.

Peace of Mind with NSW Regulations: Drafting a will in compliance with NSW laws provides peace of mind. It ensures that your wishes align with the legal requirements of the state, guaranteeing their execution.

The Need For Professional Assistance in NSW

Estate law in NSW is intricate. While DIY will kits are available, they might not capture the complexities of individual situations or the specific requirements of NSW law. A minor oversight can render a will invalid or lead to unintended legal consequences and costs. 

It’s advisable to consult with a local legal firm familiar with NSW estate laws. Our team at Redmond Hale Simpson is well-versed in the nuances of estate planning in Sydney and we’re here to guide you through this process. 

Most legally drafted will typically start from $400 and increases depending on the complexity.

Contact Us to find out more.