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wylie
01-09-2010, 01:47 PM
Can a property be held by an individual and a family trust as joint tenants?

We have been told that a trust is not a "living" entity and cannot hold assets with an individual as "joint tenants".

We will take professional advice, but curious to know if anybody has an answer.

Player
01-09-2010, 02:15 PM
Not absolutely certain, however I doubt it.

I would have thought holding as "tenants in common" would be the way to go with the percentage split of ownership being documented on title b/w the trust/entity and the living person.

Propertunity
01-09-2010, 02:19 PM
Hi wylie,

I suspect (bit do not know for certain) NOT.

Joint tenants has a survivor(ability) factor built into it. So that if one party pre-deceases the other, then their share automatically passes to the other.

The trust won't ever 'die' (yes, I think they are only good for 80 years....but that is another topic altogether).

Peter_Tersteeg
01-09-2010, 05:57 PM
I don't recall if it was joint tenants or tenants in common, but I did recently have a couple of friends purchase a property, one as an individual and another as a trustee for a family trust.

wylie
01-09-2010, 07:47 PM
Thanks everyone. The solicitor who has had some dealings with us said today pretty much what Propertunity said, but reading the trust deed, it states that the trust can do anything that a person can do (or words to that effect).

We really would like a second opinion. Is this something the law society could answer, or is there some central body who could give us a second opinion quickly and easily (without having to explain our very complicated situation)?

Clarion
01-09-2010, 09:43 PM
A trust can be a joint owner of property. However, the existence of a trust is not disclosed on the title (the Land titles Office) does not permit this. The trustee of the trust may be an individual, a number of individuals or a company. If the trustee of the trust dies, the trust's interest does not pass to the surviving joint tenants but remains in the trust. The Trust deed will provide for the appointment of a new trustee (typically by providing for a another person to act as the appointor - that is a person who 'appoints
a new trustee). The new trustee then has to produce evidence to the Land Titles office to show a) that the trustee who died was in fact holding the property as a trustee (and not beneficially) and b) that the new trustee has been validly appointed.
A caveat is sometimes lodged by the trustee to give notice (to the world at large) that it holds the property in its capacity as trustee.
Sometimes, the trustee doesn't want to disclose that it is in fact merely a trustee (and has no beneficial interest in the property). In that case, there may be a difficulty (if the trustee dies) convincing the Land Titles Office that the deceased trustee was in fact a mere trustee (lots of legal expenses and possibly stamp duties fixing that problem up). If your solicitor didn't know these things, he/she may not be the lawyer for you....

wylie
02-09-2010, 07:14 AM
Thank you for that information. I will show it to my brother (he's the brains of the operation :D).

We want to do it the way we planned if possible, for several reasons, financial and personal, and if we cannot, then we may need to change tack completely. Changing the plan has major tax implications.

We had run the plan past our accountant and planner but both suggested the solicitor give a final tick of approval. There was one other thing that threw up a reg flag with this solicitor, and we do want to check further, as we have lost a little confidence because of the other issue that he missed.

We changed to this solicitor on the advice of the accountant (who has a lot of this type of trust/company clients) during the set up of the trust, so he comes highly recommended in this type of work.

jrc
02-09-2010, 07:20 AM
The only reason why anyone would want to be joint tenants with a trust or company is on the basis that they want the property not to form part of their estate presumably to avoid a family provision claim. In NSW the deceased joint tenant's share could be declared to be notional estate by the court and available to satisfy a claim

RPI
02-09-2010, 07:47 AM
Another point

If a trustee entered into ownership as a joint tenant then te trustee would have serious issues.

A trustee has a legal responsibility to act in the best interests of the beneficiaries. An arrangement where the trust's ownership of an asset can pass automatically to the other joint tenant would be breaching this duty. It would then be theoritcally possible for the contract to be declared invalid as the trustee is entering into an arrangement that the trust deed would not authorise it to do. This would of course have to be challenged in court and would the relationships involved be tempted to challenge at any stage.

This may be able to be overcome if the trust does not yet exist. The trust deed could be drafted to include a clause expressly allowing the trustee to enter into a joint tenant arrangement with any of the beneficiaries. The construction of the clause would have to be carefully worded to make it valid.

What is it that the is trying to be acheived by entering into a joint tennat arrangement? Is there another way to structure.

general info only above, not advice, engage a good property solicitor so you are covered by their insurance etc.

Clarion
02-09-2010, 09:36 AM
Wylie,
I was about to post a reply (bearing in mind that we are a couple of hours behind you here in WA) suggesting that whilst, in theory a trust could be a joint tenant with an individual, it is not a very sensible way to do it. However, RPI beat me to it and I agree with his views that it becomes complicated - possibly with the result that the trust could only own the property as a tenant in common with the co-owner as the underlying ownership is with the persons who are the beneficiaries of the trust.

Sounds like you need a good estate planning lawyer....

marg4000
02-09-2010, 08:43 PM
Just checking the advantages of the situation.

Clearly the trust is not going to die, so I would guess that the reason for "joint tenants" would be that the property pass to the trust when the other party dies?

Is this so that the property does not form part of the estate?

Is a challenge likely?

Could this be covered by tenants-in-common on the title and a will?
Marg

wylie
02-09-2010, 09:04 PM
Thanks for your comments Margaret. You are correct in all those assumptions. A challenge could be likely, but would have scant chance of winning, but "never say never".

The other implications are GCT, daily nursing home fees, stamp duty. Lots of different things we have to keep in mind and juggle. Great fun :(.

A new will is out of the question due to mental capacity. We are doing a little more digging and looking at a few different angles.

Terryw
02-09-2010, 10:27 PM
What about using a testamentary trust? That may work out better, especially with the tax on the income.

Terryw
02-09-2010, 10:32 PM
Sorry, Wylie, just read the bit about capacity.

If the person doesn't have capacity, then you may also have issues with transferring the property -even if you have a power of attorney. You have to ask is the Attorney acting in the best interests of the person?

wylie
03-09-2010, 07:47 AM
Thanks Terry. I believe we are fine with what we are doing. It is a long term plan, that has been slowly implemented with movements happening each financial year, carefully worked out by the planner engaged at the start, to minimise tax and other implications.

If our actions were ever questioned, we have a plan in writing, a planner, solicitor and accountant who had been working closely with both Mum and Dad (and we were introduced close to the start as EPAs - but my mum carefully made sure that we were not involved in the first meetings, so as to not ever be accused of "guiding" anyone). These professionals all know the family history and problems, the reasons why the movement of properties was important to our parents, and who can each confirm that we are following the plan implemented by my parents to take it to its completion.

marg4000
03-09-2010, 04:54 PM
Actually, Wylie, the whole situation has changed.

With mental capacity an issue, I presume you are acting under an Enduring Power of Attorney (EPOA). If so, your sole legal responsibility (in administering the person's affairs) is to act in the best interests of the person who gave you the EPOA.

This may not necessarily be what was planned or agreed to when the person was mentally competent.

For example, I may be planning to give my assets to my children. This may be documented and ready for implementation when I become incompetent. I have given an Enduring POA to said kids. If they were to proceed and transfer assets into their name, even though it had been my plan, from the advice I received I believe they would be quite seriously in breach of their legal obligations under the EPOA.

We had to go into all this rather thoroughly when my mum's Alzheimers meant she entered a nursing home, leaving us with the issues of bond payment, house sale, investment decisions etc. We took legal advice before taking any action, and had to change our intentions somewhat to ensure we fulfilled our legal obligations under the POA.

To put it VERY simplistically, my sister and I were told we had to ensure all assets and monies were available to be distributed under the terms of her will when the time comes to administer her estate, or to establish that the money had been spent to her benefit. Due to incompetency we know her will won't be altered which ties our hands somewhat.

However, I am aware that legal opinions can vary so other legal advice may differ.
Marg

wylie
03-09-2010, 06:10 PM
Thanks Marg. Certainly food for thought, and I am sharing the comments on this thread with my brother.

We have certainly been left with a lot of issues to work around. Comforting to us is that the solicitor who advised us about the problems with holding as joint tenants, and who in the past, has been very fair and insisted that we look at things from every angle, including the angle from the other brother, has not suggested that this long planned for transfer should not happen, but only that the way we wanted to do it is not possible, in his legal opinion.

Ultimately, if we go ahead and one day it is challenged, we will have to deal with that. I don't really think there will be a challenge, but you just never know.