Financial planning is really about… considering co-ownership with parents


Some young clients buy homes as co-owners with their parents. Their parents usually provide 100% of the deposit, guarantee the loan and generally make the project work.

This strategy has worked for some clients, but it is not for everybody. The reason is simple: the client ends up only owning half a home. For some people, half a home is better than no home. For others, half a home is less than they want and less than they need.

But at least this strategy has them on the path to wealth.

The strategy can work best where the adult child is an only child (or, if there are siblings, the parent co-owns similar properties with all of them). In this case, owning the property as joint tenants can be a good idea. Under a joint tenancy, when one owner dies, their interest in the property simply passes to the other owners. Where the two owners are parent and child, the usual expectation is that the parent will die first. If that happened, the child automatically comes to own the rest of the property.

The alternative is to own the property as tenants in common. In a tenancy in common, the ownership interests are separate and can be sold to third parties (subject to any co-owner’s agreement) or bequeathed to third parties under a will.

Advising as to whether to own a property as joint tenants or tenants in common is actually legal advice. MLA Lawyers can provide a low-cost way for you to ensure that your clients get their co-ownership arrangements right.

The Dover Group