Jointly Held Property Risks

WHY JOINTLY HELD ASSETS ARE AT RISK TO THE SURVIVING SPOUSE IN NEW ZEALAND

There is a wrongly held belief even among lawyers in New Zealand that jointly held property between a husband and wife or common law marriage is protected by the law of survivorship. When a person dies, and they hold property jointly it becomes the sole property of the surviving spouse. However, it is not safe from a challenge.

This is the case in New Zealand where it is possible for people outside the union most commonly step-children to make an application to the Family Court to claw back half of the relationship property. An application under s88(2) of the Family Protection Act 1955 allows a representative of the Estate normally the Public Trust who will replace the executor to make half of the Estate available for the claimants.

Conversely, joint ownership can also cause a Will to fail as the testator has held property jointly rather than as tenants in common.

1. Joint Tenancy – Right of Survivorship

Most jointly owned property is held as joint tenants, meaning that when one owner dies, their share automatically passes to the surviving owner(s), regardless of what their will says. This can create complications such as:

Disinheriting intended beneficiaries – If the deceased intended for their share to go to someone else (e.g., children from a previous relationship), they may be unintentionally cut out.
Bypassing estate administration – The asset does not go through probate, which can be an issue if debts need to be settled from the estate.
Risk of disputes – Family members or other potential beneficiaries may challenge the arrangement, arguing it was not the deceased’s true intention.

2. Tenancy in Common – Estate Issues

If the property is held as tenants in common, each owner has a distinct share that forms part of their estate when they die. This means:

Probate is required – The deceased’s share must go through the legal estate process, which can be time-consuming and costly.
Potential forced sale – If the deceased’s beneficiaries want their share in cash rather than continuing to own the property, it may lead to disputes or even a forced sale.
Relationship Property Claims – If the deceased was in a relationship, their partner may have a claim under the Property (Relationships) Act 1976, complicating matters further.

3. Family Protection & Testamentary Promises Claims

New Zealand law allows family members to contest a will under the Family Protection Act 1955 if they feel they have not been adequately provided for. Similarly, the Law Reform (Testamentary Promises) Act 1949 allows claims if the deceased promised a share of the property in exchange for services but didn’t follow through.

4. Trusts and Succession Planning

Many people use family trusts to avoid these issues, ensuring that property is controlled according to their wishes rather than automatically passing to a surviving joint owner.

Conclusion

Joint ownership can be perilous because it may unintentionally override a will, lead to legal disputes, or create financial burdens. It is crucial to structure ownership carefully and seek legal advice to ensure property succession aligns with one's intentions.