Monday, November 15, 2010

What difference does 1% make?

Last week we were walking through an asset protection exercise with a business owner and one of the recommendations was that the family home (currently owned by the wife and husband as joint tenants) should be converted to tenants in common ownership and 49% of the total interest of the house owned by the husband was then to be transferred to the wife.

An earlier post touches on the difference between owning an asset as joint tenants as opposed to tenants in common - a summary of the distinction is available via the 'core services' section of the View Legal website (

Today’s post focuses on the reasons why an at-risk spouse might retain a 1% interest in a property.

The main reasons that an at-risk spouse would retain a nominal percentage interest can include:

1. Protection against spouse or relationship difficulties.

2. Protection against the majority owner seeking to encumber the property. In particular, if there is (for example) a gambling issue that arises, no mortgage may be taken out over the property without the consent of the spouse who owns the nominal interest.

3. For ease of security arrangements – often a financier will prefer to see the at-risk spouse’s name on title documentation, even if their actual ownership interest is nominal.

4. Stamp duty savings. This issue is not as relevant as in days gone by because generally there is no longer any substantial stamp duty benefit, even if both spouses retain an interest in the property.

In relation to stamp duty, it should be noted that in most states there are concessional provisions which apply where one spouse who owns 100% of a family home and transfers 50% (but no more or less) to their spouse and this is another concept that we may deal with in a future post.

Until next week.