When a co-owner dies
How a co-owner's death affects the property depends entirely on how ownership is structured.
If the property is held as joint tenants, the deceased's share passes automatically to the surviving owner regardless of what the will says. For a married couple this is often the intention. For a parent and adult child it can create serious problems — particularly if the parent has other children who expected to inherit a share, or if the parent's will left their estate to a new partner.
If the property is held as tenants in common — which most multigenerational arrangements should be — the deceased's share passes according to their will. This is more flexible but requires the will to be kept up to date and to specifically address the property. An outdated will, or no will at all, means the share passes under intestacy rules, which may not reflect what anyone intended.
What should be in the will
Each co-owner's will should address the property directly — not just leave "my estate" to beneficiaries. It should specify: who inherits the ownership share, whether the surviving co-owner has a right to buy out that share before it passes to the estate, at what price and within what timeframe, and what happens if the surviving co-owner can't fund the buyout.
Without these provisions, the surviving co-owner could find themselves sharing the property with whoever inherits the deceased's share — a sibling who wants to sell, a new spouse with no connection to the arrangement, or a beneficiary who simply wants the cash value.
Life insurance as a solution
One practical approach: each co-owner takes out a life insurance policy sufficient to fund the buyout of their share, with the surviving co-owner named as beneficiary. If Party A dies, Party B receives the insurance payout and uses it to buy Party A's share from the estate at the agreed valuation. Clean, fast, and no forced sale.
The cost of this insurance is modest relative to the value it protects, and it's worth discussing with a financial advisor as part of setting up the arrangement.
When a co-owner divorces or separates from their partner
This is the scenario most families least expect to plan for — and the one that causes the most damage when it happens.
If Party B (the adult child) separates from their partner, and that partner has been living in the shared property, the partner may have acquired rights to Party B's equity share as part of the relationship property settlement. In many jurisdictions, assets acquired during a relationship — including equity built up in a property — are treated as relationship property and subject to equal division on separation.
This means Party A could end up co-owning a property with their child's ex-partner. Or the ex-partner's claim on Party B's equity could force a sale neither Party A nor Party B wanted.
Protecting against this
The most effective protection is a contracting out agreement (known as a prenuptial or cohabitation agreement in some jurisdictions) between Party B and their partner, specifying that Party B's equity in the family property is separate property and not subject to division on separation. This requires both parties to have independent legal advice and must be entered into voluntarily.
It's a sensitive conversation to have with a partner, but significantly less sensitive than the conversation that happens if the relationship ends without one.
The co-ownership agreement should also include a right of first refusal that prevents any transfer of an ownership share — including to a separating spouse — without the other co-owner's consent and the opportunity to purchase at the same price.
When the parent remarries
Party A's new spouse doesn't automatically acquire rights in the property. But several things can complicate the arrangement:
If Party A dies without updating their will, the new spouse may inherit Party A's share under intestacy rules, becoming Party B's co-owner. If Party A and their new spouse later separate, the property may be treated as relationship property and subject to division. And if the new spouse moves into the property, questions arise about their status — occupant, licensee, or something with more formal rights?
The co-ownership agreement should address these scenarios specifically: whether Party A can bring a new partner to live in the property without Party B's consent, what rights (if any) that partner acquires, and how Party A's remarriage affects the ownership and exit provisions.
When Party A needs care
If Party A develops care needs that require funded residential care, the property may be assessed as an asset for means-testing or asset assessment purposes, potentially triggering a forced sale or requiring a charge to be registered against the property. This varies significantly by jurisdiction and individual circumstance.
Families who enter multigenerational arrangements partly to support ageing parents should take specific advice on this — ideally before the arrangement starts. The structure of ownership (who owns what percentage, how long they've owned it) can affect how the property is treated in care funding assessments.
The document checklist
To protect against the scenarios above, each co-owner needs:
- An up-to-date will that specifically addresses the shared property
- A co-ownership agreement or Declaration of Trust covering death, divorce, and relationship breakdown scenarios
- A right of first refusal preventing unwanted third-party co-ownership
- Consideration of a contracting out agreement between Party B and their partner
- Life insurance sized to fund a buyout (recommended, not required)
None of these are complex to put in place at the start of an arrangement. All of them become complex — and expensive — to resolve if something goes wrong without them.
This article provides general information only and does not constitute legal advice. Property and family law vary significantly by jurisdiction. Always consult a qualified solicitor or property lawyer — and a financial advisor — before entering into any co-ownership arrangement.