Different ways to own property

[Terry_w]

There are really only 3 ways to own a property:

1. Sole owner
2. Joint Tenants (JT)
3. Tenants in Common (TIC)

The main difference with a JT and TIC ownership relates to what happens on death:
JT - if one owner dies the suriving owner(s) get the deceased's 'share'. An interest in a JT property cannot be left via a person's will.
TIC - if one owner dies the person nominated in that person's will, or the intestacy laws if no will, become the next owner.

But there can be different types of owners:
A. Individual
B. Trustee
C. Company
D. SMSF (trustee)
F. SMSF (Custodian Trustee)

There can be different types of owners holding property jointly as either JT or TIC.
e.g.
a) an Individual may own a property with a SMSF trustee as tenants in common. (may not be ideal to structure it this way).
b) An individual and a company as Joint Tenants
c) two separate SMSF trustees.
d) three trustees
e) an individual, a company, a trustee of a discretionary trust and a SMSF trustee could all own the one property as tenants in common - would be very unusual!

The above covers the legal ownership of the property, but the structure of the structure can vary a lot behind the scenes

e.g.
i) an individual may own the property, but he could be acting as trustee for
- another person (a bare trust)
- a unit trust
- a hybrid trust
- a discretionary trust
- a SMSF fund (would need at least 2 individual trustees)
- etc
ii) a company
- in its own right
- a trustee of
= discretionary trust
= unit trust
= SMSF
etc

Each trust will have different terms, different beneficiaries etc
Each company will have different shareholders etc
- shares can be owned
a) individually
b) by 2 or more peopler as
c) Joint Tenants
d) Tenants in Common.

Hope this brief summary is of interest.

 

[redwing]

Hope this brief summary is of interest.

Always of interest

 

[CHAOS]

Thanks terry

I was curious if you could own half a property as individual and half in trust.

 

[nhg]

Great post Terry!!!

 

[Paul@PFI]

And there is also : "E" bare trust NOT in a SMSF....Deed of Apparent Purchaser for example. One of the asset protection instruments of the wealthy thats not unlike two card marley.

One non-ownership strategy that is overlooked is what could be called SMSF "absolute entitlement". Its better known as a reversionary pension. The assets exist in perpetuity until a cashing issue is forced (ie death). A RP can bypass that and also bypass the compulsory cashing and recontribution.... Its a bit of a rear view mirror way to look at asset succession. Rather than deal with what may happen its a strategy to avoid what may happen. Another example is a testamentary trust where a trust or SMSF isnt involved. It can avoid the issue of inheritance as such. +/- needs good legal & tax advice.

Chaos...Yes. Provided its TIC. It can impose some limits and there can be circumstances it can be downright impossible. For example think of a SMSF owning 50% of a resi IP and a related party (member ??) owns other 50% TIC. The SMSF can NEVER acquire the other 50% or even another 1%. Who operates the rental and banking ?? Member cant use IP as loan security etc...