Purchasing a property is one of the most significant milestones in life, often representing a substantial financial investment. For blended families, this process comes with unique challenges and opportunities, making it essential to consider the legal aspects carefully and mitigate potential future risks.
Understanding the Dynamics of Blended Families in Australia
According to the 2021 Census, there are 6 million families in Australia, with 90% of families with children consisting of at least one child who is the natural or adopted child of both partners. However, 6% of families are step-families, where one child is a step-child but there is no child who is the natural or adopted child of both partners. Additionally, 4% are blended families, defined as those where there are at least two children, one who is the natural or adopted child of both partners, and at least one who is a child or step-child of one partner.
With the next Census likely to show an increase in the number of blended and step-families, it becomes increasingly important for these families to establish a robust legal framework for property ownership that addresses their specific needs.
Property Ownership Structures: What Blended Families Should Consider
When purchasing property, individuals typically choose between two primary ownership structures: joint tenants and tenants in common. Blended families must carefully consider which structure best suits their estate planning needs.
Joint Tenants
In this common ownership structure, both parties own an equal share (50/50) of the property. The ‘right of survivorship’ applies, meaning that if one of the joint tenants passes away, their share automatically transfers to the surviving joint owner. While this arrangement simplifies the transfer process, it may not be ideal for blended families with complex beneficiary arrangements. For example, if Sophie and Cory own a property as joint tenants and Cory passes away, Sophie would automatically own the entire property, preventing Cory from leaving his share to his children from a previous relationship through his Will.
Tenants in Common
This alternative structure allows co-owners to hold specific shares of the property, either in equal or unequal proportions. Should a co-owner pass away, their share becomes part of their estate, enabling them to designate beneficiaries in their Will. For example, if Sophie and Cory own a property as tenants in common in equal shares, Cory can dispose of his 50% share to his children from a previous relationship through his Will.
Blended families might also consider options like granting a spouse a right to reside or a life tenancy, allowing them to live in the property until a specified time or their passing. After this period, the property can pass to alternate beneficiaries as outlined in the Will.
Due to the ‘right of survivorship’ inherent in joint tenancies, property owners in subsequent relationships often prefer to own property as tenants in common. This allows them to control how their interest in the property is disposed of through their Will. However, this arrangement can lead to complications if one party wishes to sell their share and the other does not, particularly if the surviving spouse becomes a co-owner with the deceased’s children.
Furthermore, it’s important to note that any disposition through your Will can be disputed. ‘Eligible persons,’ which can include a spouse, child, or stepchild, among others, can make a claim on your estate for further provision, complicating the estate distribution process.
Making the Right Choice for Your Blended Family
Purchasing property as a blended family requires careful navigation of the legislation governing ownership and asset distribution. As the number of blended families in Australia continues to grow, it’s increasingly important to have the right legal framework in place.
By selecting the appropriate ownership structure and utilizing effective estate planning tools, you can protect your assets, provide for your loved ones, and ensure that your property is distributed according to your wishes.
Consult with a Legal Specialist
It’s important to get the right advice, so you can understand the complexities of purchasing property as a blended family. Whilst as brokers we can guide you and assist with your lending needs, we do advise that you seek legal advice and ensure that your ownership structure reflects your estate planning needs.