Joint owners or Tenants in Common
Many people don’t know that they should buy their house as Tenants in Common, when they buy a house together, whether married or not, they buy the house as Joint owners. They often have been asked “how would you like to own your house?” but probably haven’t been educated about the different ways to own property and owning it Jointly seems the right thing to do at the time.
They then think that they own the house half and half but this is not the case, each person owns 100% of the house so if one of them dies, the other owns the whole property by the rules of survivorship in their sole name no matter what it says in the will of the deceased person.
Sometimes this arrangement suits both parties but very often it doesn’t but they don’t realise the implications. For example, if the surviving spouse is elderly, then they may require long term care after the death of their husband/wife and if they own the whole house in their sole names then there is a possibility that they could lose the house to the local authority to pay for that care. Or if the surviving spouse is young then they might remarry, write a new will to benefit the new spouse and the children from the first marriage could inherit nothing. Obviously these are worst case scenarios but these possibilities exist and can be guarded against using the following method:
We can change the Jointly owned property, whilst both owners are still alive, to Tenants in Common. This effectively puts a dotted line down the middle of the house, only effecting the equity, so that each person can control their share of the house in their wills.
Then, in the Wills, we include a Protective Property Trust which holds the deceased’s share of the house on trust for their children whilst, at the same time giving the surviving spouse permission to live there for the rest of their lives, or use the capitol in the trust to buy a new house if they wish to move and downsize etc.
This way, if the surviving spouse re-married or goes into long term care, then the worst that the new spouse or local authority can do is take the share that belongs to the surviving spouse, not the share that’s held in trust for the deceased’s spouse’s children.
Tenants in Common, in conjunction with Protective Property Trusts in your wills are Inheritance Tax Neutral, that is, doing this has no effect on any IHT liability that may exist.
My fees for carrying out this work can be found on the pricing page of this website here.
