The deceased and his son owned two properties that were originally purchased in 1997; mistakenly as tenants in common. The mistake was corrected one year later when the properties were transferred to them both as joint tenants. The effect of owning the properties as joint tenants was that on the death of the father in 2009, the properties were transmitted by survivorship to the son and did not form part of the estate.
The son gained from this correction because the two properties, which together were worth $5 million, were accordingly his and did not form part of his father's estate. This in turn meant that the father's estate reduced in value from $2.5 million (a half share of the two properties) to $39,000 - hence the claim by the disgruntled beneficiaries (who did not include the son).
The High Court held that the residuary beneficiaries were not entitled to information from the executors and trustees of the estate. The properties were personal assets that were transmitted by survivorship prior to death and as such the circumstances were confidential.
If property is owned as joint tenants then it does not become part of the estate and transfers by survivorship to the surviving joint tenant regardless of the contents of the will. If property is owned as tenants in common, then it forms part of the estate and is dealt with according to the terms of the will.
It is common for the executor and trustee named in a will to be the same person, however beneficiaries' rights of disclosure of information differ depending on whether they seek disclosure from the Executor or the Trustee.
In the above case, the residuary beneficiaries could not compel the Executors to disclose any information because they had no legal or equitable property interest in the unadministered estate. They had no greater right to disclosure after death than during the deceased's lifetime.
The residuary beneficiaries also could not force the Trustees to disclose information regarding the transfers because the information sought was information relating to non-trust assets. The assets were not part of the residuary estate. The Court held that disclosure is at the Trustees' discretion and if asked the Court would intervene in a supervisory role, if appropriate, given the particular circumstances. In this case, the residuary beneficiaries could not show good reason for the court to intervene and order disclosure.
A beneficiary has a right to disclosure of information by the Trustee, provided the information sought relates to the assets of the estate.
Understanding the manner in which property can be owned, including an appreciation of the distinction between joint tenants and tenants in common is crucial to estate planning. For more information please contact our estates team leader Bryce.firstname.lastname@example.org, or call him on +64 4 916 6436.