The way in which you own property with another person will determine whether or not it is dealt with by your estate in accordance with the terms of your Will if you die.
Joint Tenants vs Tenants in Common
If you own property as joints tenants with another person, that property will, as a right of law under the principle of survivorship, automatically pass to the surviving person. This means that the property is protected in the event that someone contests your Will.
If you own property as tenants in common with another person, the share that you own is dealt with in accordance with your Will and could be up for grabs in the event of a claim against your estate.
Sally and Joe are recently married and have purchased their first house together. Joe had a previous relationship and had children from that previous relationship who are still minors. They decide to purchase the house as joint tenants. The consequences of this are, if Joe were to pass away and Sally survives Joe by 30 days, Sally will become the sole owner of the house. She does not have to wait for Probate of the Will and there is no risk of the house being up for grabs if Joe’s previous partner contests the Will on behalf of the minor children.
In the alternative, Sally and Joe decide to purchase the house as tenants in common. If Joe passed away (or Sally) then Joe’s Will will determine who is given the house. There is also a risk that even if there is a direction in Joe’s Will that the property is to be given to Sally, his previous partner could apply to the Court under a Family Provision Application which allows for eligible persons to apply for further provisions on the basis that the deceased had a moral obligation to provide for that person and failed to do so.
Similarly, the way in which bank accounts are held will determine whether your surviving spouse will be frozen out of your bank account or alternatively, if held jointly, they will continue to be able to access funds. If you hold individual bank accounts, the bank upon becoming aware of your death is required to “freeze your account” until such time as your Executor can provide the documentation required to satisfy the bank as to who is entitled to the funds. The value of your account will determine what hoops your Executor will have to jump through. Until then, your loved ones may not have access to funds for basic living expenses during what is already a difficult and emotional time.
The general starting point with jointly held bank accounts is that on the death of one of the account holders, under the principle of survivorship, the account balance passes in its entirety to the surviving joint account holder. This means that the surviving account holders can continue to operate the joint bank account even if they are not the Executor of your will or before the Grant of Probate is obtained.
Consideration of how property is held is an important consideration in your estate planning.