For many years in Australia, one of the most popular tax planning tools to manage death duties involved assets being held as joint tenants, instead of tenants in common.
Previous posts have the distinction between these two ownership structures. As usual, please contact me if you would like access to this content.
A surviving joint tenant receives the asset automatically (without anything passing via the deceased owner's estate). Joint tenancy ownership was often seen as the easiest way to delay the imposition of a death duty for as long as possible.
In jurisdictions that still have death duties, this ownership structure can provide a pathway to manage the tax impost.
Interestingly, under Australian law, the strategy can still provide planning opportunities.
In particular, where an asset is owned as joint tenants with a non-resident, the tax that would otherwise be paid by a non-resident on the death of a co-owner under capital gains tax (CGT) event K3 can potentially be avoided if the relevant asset is owned as a joint tenancy. This is because CGT event K3 is only triggered where assets actually pass via an estate.
It is important to note that in recent years the federal government moved to close this potential 'loophole'. At this stage however, no such changes have occurred.
** for the trainspotters, the title here is riffed from a Sonic Youth tune ‘Death to our friends’.