Many people are surprised to learn that assets held jointly with another person usually do not form part of their estate when they pass away. In fact, some surprising things can happen with jointly owned assets which you may not be aware of. Let's take a look at some of the more common ones.

Real Estate

Real property owned between two parties can be owned in one of two ways, and each way is treated differently from an estate planning perspective.

One way is called Joint Proprietors, and this means that when one of the co-owners dies, the property automatically passes the surviving owner(s) and does not form part of the Will. Most couples own property in this way.

The other way is called Tenants in Common, and this means you own your percentage yourself and you can gift your percentage in your Will. This is commonly used when, for example, siblings own property together.

The decision about which ownership was put onto the title was made when you purchased the property, and should have been covered with you then. The type of ownership can be changed, however this change may incur stamp duty. It is often important for us to clarify exactly how your property is owned as part of your estate planning.

Bank Accounts

A bank account which is jointly owned passes automatically to the survivor on the death of one co-owner. Note that co-ownership is different from someone else being a mere signatory on the account.

However, it is very important to note that banks generally have the right to freeze a joint account on the death of one co-owner for a period of time, usually until Probate is granted. As this can cause considerable financial difficulty, it is important to ensure that you would have access to other financial resources to meet your expenses in the event that this happened to you.

Self Managed Superannuation Funds

Couples usually establish an SMSF together and often consider the assets owned by the SMSF to be joint. In actuality, they are not. In the record keeping of the SMSF each member owns their own discrete share of the SMSF assets and on their death they need to be dealt with appropriately. It is particularly important for couples who would like to maintain assets in superannuation to have proper planning to make sure the assets stay in the fund and are not required to be sold to pay out a lump sum payment to the spouse. We frequently work with our clients financial advisors to make sure outcomes like this are achieved.

 

The varying treatments of jointly held assets is a perfect example of how estate planning can often be more involved than one realises! Contact us today to get it right.