How does joint tenancy work during a divorce?

How does joint tenancy work during a divorce?

How does joint tenancy work during a divorce?

In Australia, most married couples typically own property such as real estate as joint tenants in equal shares.

So, how does joint tenancy work during a divorce?

In the context of separation and divorce, most people think about joint tenancy in relation to real estate but the concept of joint tenancy also applies to other property like cars, bank accounts, stock portfolios and furniture.

How does joint tenancy work in a divorce

When a couple decides to end their marriage in Australia the usual practice is to consult legal experts and come to an agreement about splitting up the property and assets acquired during the course of the marriage.

This also includes superannuation.

But for the purposes of discussing joint tenancy, superannuation will not be considered in this discussion.

In relation to real estate, joint tenancy means that each person owns an equal share and interest in the property, and should one party die, then the title to the property passes solely to the surviving member of the partnership.

This is called a right of survivorship.

So that even if the deceased person had intentions to will their property to another party, the right of survivorship trumps this, and the surviving partner will be deemed to be the sole owner of the real property.

How does joint tenancy differ from “tenants in common”

If the property was owned under a “tenants in common” arrangement, then there is no right of survivorship.

However, this property arrangement is less likely to be in place for married couples.

With a “tenants in common” property arrangement, the property can be owned in varying degrees.

For example, one party owning 40% and the other party owning 60%.

Joint tenancy

How does joint tenancy work during your property settlement?

When a couple decides to separate the first step is to calculate the assets and liabilities acquired during the marriage or relationship.

It is good practice for both parties to obtain specialised legal advice in this respect, to determine a fair and equitable property settlement.

This usually results in Consent Orders being prepared by your legal expert and then lodged with the Family Court of Australia.

If the financial arrangements are agreed upon by both parties and the court finds them reasonable then the property division can proceed.

To complete the property settlement, the next logical step is to make arrangements to end the joint tenancy.

In relation to real estate, and regardless of whether the property is mortgaged or not, one party will usually buy the other party out.

That is, they will sell their interest in the property to their former partner – basically transferring their interest in the real property to the other party in exchange for a lump-sum payment.

With either vacant land or the family home, this can be achieved with a straightforward property Transfer Form which you need to be completed and stamped, and lodged with the relevant state property title registry.

Transfer forms will vary from state to state.

The easiest way to arrange this is to engage an excellent family law expert or property lawyer who can draw up the paperwork for you.

Transferring your interest to the other party or vice versa also does not incur stamp duty (thankfully).

That aspect is discussed in more detail in our blog post, Divorce Financial Advice.

Notwithstanding, before proceeding with any of the above, you should also read our article, Separation Checklist, to protect yourself while you are in this difficult transition period.

During divorces, it is not unusual for emotions to be overwhelming and you need to keep a clear head while you are finalising property arrangements.

Joint bank accounts are also considered a joint asset and these, along with any other assets you and your former partner acquired during the marriage will need to be considered when drafting a final property settlement prior to finalise your divorce.

While real property is still held jointly by both parties, then each party can also place a caveat on the property or the mortgage in the event of any uncertainty while divorce proceedings are continuing.

This is more likely if one party is likely to redraw mortgage funds or sell the property (which can happen) without your agreement.

If you suspect that your former partner is likely to do this then you should seek immediate legal advice and you can immediately place a caveat on the property or the mortgage to prevent any funds from being released.

Once the property settlement is agreed upon and the joint tenancy successfully transferred to the party taking over the mortgage/house etc, then your rights and obligations to the other party are terminated.

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