Sibling Joint Owned During a Divorce

[eXc]

Hi All,

My parents have investment properties through inheritance. They are shared with a parents sibling.

It appears the sibling will be getting a divorce.

My parents will probably seek legal advice over this, and the sibling certainly will, but I am hoping for some general advice/knowledge on this matter.

My parents are not in a situation where they can buy out the sibling share of the investments. Given that it is a join asset, is the ex entitled to their half of the investment, thus forcing my parents to either buy their half, or sell?

Is there anything they can do to prepare for this? Would it be better to sell before the divorce settlement? Is it likely there will be a 'fire sale' as a requirement of the divorce settlement, or will it end the same either way for them?

Also, will infidelity have any bearing on the outcome?

thanks in advance.

 

[Terry_w]

infidelity is irrelevant under Australian laws,

Your parents will be in for a bumpy ride. Any transfer now to defeat the entitlemnet of the spouse could lead to issues. But it still maybe worthwhile.

Seek legal advice asap.

 

[thatbum]

Shrug, I'd be surprised if it affected your parents much to be honest. Especially if they and their sibling didn't want it to affect that particular property.

An equitable division of assets can be done without necessarily altering the interests in that particular property for example.

 

[Terry_w]

I was assuming it could get nasty - spouse could place a caveat on title to prevent a sale too.

 

[eXc]

infidelity is irrelevant under Australian laws,

Your parents will be in for a bumpy ride. Any transfer now to defeat the entitlemnet of the spouse could lead to issues. But it still maybe worthwhile.

Seek legal advice asap.

Thanks Terry - They don't intend to defeat the entitlement.

My thoughts were if they sell now, it gets it out of the way - the divorcing party can then just split the money then.

I was just worried that they may be forced to sell at a fire sale price and lose money.

 

[eXc]

Shrug, I'd be surprised if it affected your parents much to be honest. Especially if they and their sibling didn't want it to affect that particular property.

An equitable division of assets can be done without necessarily altering the interests in that particular property for example.

If that is the case - it will potentially depend on the sibling then, not the spouse? (assuming it doesn't get nasty)

 

[marg4000]

You speak of properties is I assume there are at least two, both owned jointly between parent and sibling.

Assume partner is entitled to half of sibling share.

Would a title shuffle be an option, with cash difference if necessary to put one property into each sibling individually? Stamp duty and fees may be payable but may be worth considering?
Marg

 

[Terry_w]

Thanks Terry - They don't intend to defeat the entitlement.

My thoughts were if they sell now, it gets it out of the way - the divorcing party can then just split the money then.

I was just worried that they may be forced to sell at a fire sale price and lose money.

Yes it might be better to pre-empt any messy issues by selling beforehand. I have seen contracts signed and then a caveat lodged afterwards causing settlement to not occur.

but get advice.

 

[Perp]

Excuse me for digressing, but if parents leave a property to their two offspring (for example), do the offspring then own the property as joint tenants rather than tenants-in-common? Or does it depend what the will says?

Owning as joint tenants sounds like a recipe for succession disaster. e.g. Sibling A jointly owns 4 properties with Sibling B, that were passed to them from their parents. Sibling A's kids - and possibly Sibling A, too - anticipate that they will ultimately own half the portfolio, but if Sibling A dies first, doesn't that mean Sibling A's kids will get nothing, and everything will belong to Sibling B, and ultimately Sibling B's offspring?

 

[Terry_w]

Excuse me for digressing, but if parents leave a property to their two offspring (for example), do the offspring then own the property as joint tenants rather than tenants-in-common? Or does it depend what the will says?

Owning as joint tenants sounds like a recipe for succession disaster. e.g. Sibling A jointly owns 4 properties with Sibling B, that were passed to them from their parents. Sibling A's kids - and possibly Sibling A, too - anticipate that they will ultimately own half the portfolio, but if Sibling A dies first, doesn't that mean Sibling A's kids will get nothing, and everything will belong to Sibling B, and ultimately Sibling B's offspring?

Depends on the will. If the will is silent there is a presumption which differs in each state.

JT is a disaster and generally not recomended. What about death and bankruptcy - easy to lose the whole house instead of just 50%.

 

[Paul@PFI]

Joint tenancy in property is often encountered in family law, creditor claims and also bankruptcy. Sometimes its the sole liquid (??) asset.

Just as your parents don't want a uninvited stranger as a co-owner the other party doesn't want it either. Many states have provisions that allow a joint tenant to force another to sell too. Sometimes these matters bring matters towards a point of negotiation. Its why many creditors accept less than $1:$1. A $100K interest in a property may be worth $20K in cash to avoid the dispute and the legal costs.

Worth discussing strategies with a lawyer. Selling may not be wise if the asset converts from property to cash. Cash is too easy to value.