There is a common belief that where real or personal property is held by a husband and wife jointly, then if one of them passes on, their share automatically is transferred to the surviving spouse. This is not necessarily the case, as it depends upon whether the particular asset – for example a home, a car, or a piece of art – is owned as “joint tenants” or as “tenants in common”.
The interesting stuff
Having mentioned these things to colleagues over the past few days, I have discovered that this information is not generally seen to be anywhere near as interesting as I think it is. So to jazz it up, I will use an example (Queensland law).
Frank and Helen own all of their property jointly. They have their home worth $1.5M which is recorded as joint tenants, a joint bank account with $150,000 in it, furniture worth $100,000, and a 1971 Ford Falcon GTHO that they bought new and which is now worth $850,000. They have two adult children. Neither bothered making a will because they thought it wasn’t necessary as they own everything jointly. Frank got overly excited watching the V8 supercars and passed away. So what happens?
Well:
- Franks interest in the home will transfer to Helen by a record of death;
- Helen will assume ownership of the joint bank account as the surviving owner (note, this is because of the terms under which the account operates) so that becomes hers;
- Under the rules of intestacy, Helen is entitled to the household contents;
- Frank’s half share in the Falcon would be dealt with under the rules of intestacy, in this case his share with a value of $425,000 would be an estate asset and distributed as to the first $150,000 to Helen, then Helen would have a third of the balance ($91,666) and their children would receive $91,666 each.
But let’s substitute that Falcon for some shares worth $2M and from which Frank and Helen have been living on the dividends. Ignoring tax outcomes, Frank’s $1M share would be given $150,000 to Helen, then $283,333 to Helen, and then $283,333 to each of their children, essentially pulling nearly $600,000 out of their investments.
An even worse outcome would have occurred if Helen and Frank had owned their home as tenants in common, as Helen would have had to buy Frank’s share in the home if she wanted to keep it, losing another $750,000 from her investments.
So let’s consider a variation to the scenario. Helen now has a will made given the dramas she had with Frank’s passing. She wants everything to be given to her children equally. But she also wants the Falcon to stay with her children, as a monument to Frank. If she gives the property “equally” then that will generally be taken as tenant’s in common, so the if one of her children die after they have become owner, their interest in the car will pass under their will. If she wants it to remain with her surviving child, then she will have to make it clear in the will that it is being given to her children as joint tenants. In that case the will should deal with the Falcon independently of all other assets, which would usually be given as tenants in common.
The boring stuff
When a couple buys their home, the will usually have to nominate on the transfer whether they are to hold it as joint tenants or as tenants in common. If it is held as joint tenants, then upon the death of an owner, their share in the property automatically vests in the surviving owner (a form is required to record this). If the property is held as tenants in common, then on the death of an owner, their share is dealt with under their will, or if there is no will, under the intestacy laws. This could mean that the co-ownership will end up being between the surviving owner and a third party named as beneficiary in a will, or if there was no will, according to the person or persons entitled in an intestate estate.
The situation is more or less the same with personal property, by section 28 of the Property Law Act 2023 (Queensland). This section (in very basic terms) provides that where there is a transfer of property to two or more people the transferees own as tenants in common unless the terms of the transfer provide otherwise. This means that if a couple buy a piece of art for $100,000, then unless the terms of the purchase contract provide that they are buying as joint tenants, then they hold it as tenants in common, with the effect that if one of them dies, their interest in the piece of art is dealt in accordance with their will or the rules of intestacy.
Section 28 of the Property Law Act does not apply to transfers made under a will. In a case where a gift is made under a will to two or more people, then the question of whether the beneficiaries own as joint tenants or tenants in common is determined with reference to common law principles. A significant case in Queensland in relation to these principles is the judgment of His Honour Justice Derrington in the will of Leaver, delivered 7 March 1996. In this decision, His Honour commented that where there was doubt as to whether a gift was given to beneficiaries as joint tenants or tenants in common, the court will generally find against a joint tenancy and in favour of a tenancy in common because of the inconvenience and possible unfairness associated with a joint tenancy, and a court will give effect to the “slightest indications that a tenancy in common is intended”.
The language of the will will often support the existence of a tenancy in common, for example where a gift is given to beneficiaries “equally” or “in equal shares”. Even using the words “as joint tenants” was (in the matter of re Rose Deceased [1962] QWN 4) considered not sufficient to displace the presumption of a tenancy in common, when the wording in the will was “in equal shares as joint tenant”.
So the effect of this is that for most jointly owned property (other than homes and joint bank accounts) if someone dies it will not “automatically” go to the survivor.
The important stuff
So are there any lessons here?
First, will makers should not assume that everything that their own with their spouse will automatically be taken by their spouse if they die. Their will should specifically deal with their interest in those things, except where the property is clearly held and recorded as being held as joint tenants.
Second, people who think that they don’t need a will because all of their assets are owned jointly with the spouse should think again.
…and a plug…
For advice in respect of wills and property matters, please contact Peter Muller at peterm@qbmlaw.com.au and Jessica Murray at jessicam@qbmlaw.com.au
