Estate Planning Referral , TRUSTS & DEBT DEFENCE

Legal Referral Services, TRUSTS & DEBT DEFENCE

Why Sever or split Land held as Joint Tenants ? - Can be a Good Strategy.......

MEMO – SEVERANCE OF TENANCIES

 

RE:  SEVERANCE OF JOINT TENANCIES TO TENANCISE IN COMMON – A USEFUL ESTATE PLANNING TOOL BOTH BEFORE AND AFTER DEATH

 DATE:                 14 04.2010

 The Essence of having parties(usually spouses/partners) sign a transfer either to effect severance of a Joint Tenancy to Tenancy in Common in equal shares or indeed to have a Property presently solely owned by a Spouse/Partner to both in Equal shares as Tenants in Common is Two fold ;

 (1)                 Provision of Asset Protection during Clients’ Lifetime and after death as well

(2)                 Tax Reasons.

 -it should be noted that these transfers do not have to be registered (ie its optional) and can just be kept in clients files/a safe place or with their Wills in the event the need arises to utilise them as estate planning tools either before or after death.(Note :For clients who want to be doubly certain of asset protection after death and/or the effectiveneness of such transfers ;clients may choose for safety’s sake to go ahead and register such transfers)

 With respect to (2) above ; Possible tax implications ; if Clients have a Will that passes on their property to a Spouse/Partner via a Testamentary trust the use of such severances may be especially useful because when both spouses are alive they have two tax thresholds to derive benefit from ; when one dies there is only one ; at least say for example if the deceased’ spouse’s property or half a real property has passed into a trust then tax type income splitting may be put in place in respect of any income derived from that property.

By way of further background explanation ;

  1. (1) Transfer(s) from  either Ownership by One Spouse/Partner to Ownership as Tenants in Common (2) Transfer(s) from Joint Tenancy to Ownership as Tenants in Common.

 (1) Transfer(s) from  either Ownership by One Spouse/Partner to Ownership as Tenants in Common

 In respect of any Land/Properties you  own  it is usually recommended that you sign a transfer so that such a Property if in the sole name of one Spouse/Partner Owner, you can have 50% of such property transferred to the other Spouse/Partner as Equal Tenants in Common with the other.

 (2) Transfer(s) from Joint Tenancy to Ownership as Tenants in Common.

 In respect of Land/Properties you own jointly it is usually recommended that you sign a transfer to have the tenancy/ownership changed from Joint Tenancy to Tenants in common , so each Spouse/Partner owns their part of the land separately. This Provides Asset/Property Protection and possible Tax Benefits.

 -These Transfers are often not registered now but are kept with your Wills and may be used during your lifetime for Asset/Property Protection in the event there is a problem or alternatively registered by your Executors after death after appropriate Accounting, tax and Legal advice to provide a better tax outcome (income splitting between surviving spouse perhaps and the Trusts(s) created after death) “ (Note the use of the Transfers is thus Optional and Executors may after such advice indeed decide not to utilise them)

 ===========================================================================================================

Copy of Illustrative email from NSW Office of State Revenue appears below ; (but same applies in all Australian States & Territories)

 

Dear Sir

 

Married couple

 

With a married couple  who are transferring their principle place of

residence so that they end up as equal owners (this is as joint tenants

or as tenants in common in equal shares ), we can exempt this under

section 67 of the Duties Act 1997 .

 

This can be done by transferring from one spouse to both spouses to

hold equally as tenants in common in equal shares or joint tenants.

 

The evidence required would be a signed and completed form ODA 009

which is on our website at www.osr.nsw.gov.au and a signed and completed

Transfer form.

 

If you are not going to be equal owners or if this is not your

principal place of residence then you need to get a valuation by a

registered valuer and pay duty based on the dutiable value of the

interest being transferred over. Our rates of duty are on our website.

 

 

De facto couple

 

With a de facto couple  who are transferring their principle place of

residence so that they end up as equal owners,  we can exempt this under

section 67 of the Duties Act 1997 provided that they have been in the de

facto relationship for two years prior to this transfer.

 

This can be done by transferring from one partner to both partners to

hold equally -this is as joint tenants or as tenants in common in equal

shares .

 

The evidence required would be a signed and completed form ODA 009

which is on our website at www.osr.nsw.gov.au and a signed and completed

Transfer form.

 

If you have not been in the relationship for 2 years or you will not be

equal owners or this is not your principal place of residence then this

is liable to duty based on the "dutiable value" of the interest being

transferred over. An original valuation by a reg’d valuer is required.

The "dutiable value" is the market value of the interest being

transferred or the consideration paid for that interest whichever is

greater.

 

Yours sincerely

R Hill

Duties Assessing

for Tony Newbury

Chief Commissioner of State Revenue