When purchasing a property, it’s important to consider how you will own it, as different ownership structures can have varying legal and financial implications. At Core Legal in Wellington, we regularly advise clients on the most suitable ownership arrangements based on their circumstances and future plans.

Take, for example, Jan and Mike, a couple with children from previous relationships. They wanted to ensure that if either of them passed away, their respective children would inherit part of the property. If they chose to own the property as joint tenants, the surviving partner would automatically inherit the whole property if one of them died, leaving nothing for their children. Instead, they opted to own the property as tenants in common, which allowed each of them to own a specific share of the property. This way, they could leave their share of the property to their children in their wills.

Joint Tenants vs. Tenants in Common

• Joint Tenants: When you own property as joint tenants, both owners have equal shares, and if one dies, their share automatically passes to the other. This is a common arrangement for married couples or partners who wish to leave the entire property to each other.
• Tenants in Common: In this structure, each person owns a distinct share of the property, which can be equal or unequal. This allows each owner to leave their share to whomever they choose, often specified in a will. This option is especially useful for couples with children from previous relationships, as seen in Jan and Mike’s case.

There may be situations where multiple owners want to divide their shares differently. For example, two people could each own 50%, or three people could own 40%, 30%, and 30%. It all depends on how the ownership is structured at the time of purchase.

Owning Property Through a Trust

Another common approach is to hold property through a trust. In this case, trustees legally own the property on behalf of the beneficiaries of the trust. Trust ownership can offer protection from creditors, relationship property disputes, and other claims. However, if a trust is being used for relationship property protection, a contracting-out agreement (prenup) is often necessary to ensure everything is clearly defined.

Property Ownership by a Company

Owning property through a company can also be beneficial, particularly for rental properties. Company ownership may offer tax advantages, as well as the ability to distribute profits to shareholders in a tax-efficient manner. This structure can be particularly useful for investors or those purchasing multiple properties.

Why Getting Legal Advice Matters

Deciding how to own your property is an important part of asset planning. The right structure can provide flexibility, tax benefits, and protection from future disputes. However, choosing the wrong structure can have unintended consequences. For example, owning property as joint tenants may seem simple, but it could create challenges for estate planning if you want to ensure your children inherit part of the property.

At Core Legal in Wellington, we can guide you through the complexities of property ownership, helping you understand your options and make the best decision for your circumstances. Whether you’re purchasing your first home, a rental property, or planning for the future, our team of experienced lawyers can provide the advice you need to protect your interests.

For rental properties, we also recommend seeking advice from an lawyer or accountant to understand the tax implications of different ownership structures.