Property - Joint Ownership or Tenants in Common?

Uncategorized Sep 03, 2017

If you co-own a property with someone else you should already know the difference between owing it Jointly or Tenants in Common but just in case you don't let's clarify the situation.

If you own a property Jointly, think of it as you own it as if the two of you are one person. This means that both of you jointly own any equity in the property. This means that if one of you passes away the other automatically inherits the property entirely.

If, however, you own the property Tenants in Common, then you each own 50% of any equity in the property.

You may think what's the difference and why does it matter?

Let me explain. Imagine that one day in your later years, one of you dies, if owned jointly the remaining person would inherit the whole property. This may not be a good idea, because if they ever need care in the home, or elsewhere
the local authority would include the value of the property in their means testing calculations as there would now be one sole owner. This would almost certainly mean that the house would be sold to repay the cost of care after the
death of the remaining person, or at the time that they left the home for care elsewhere. The end result would be that the home that they have worked all their lives for has been lost and would not be passed on to their family after their death.

In fact, going back to the situation should the first person need care, the local authority can still put a charge on the property for the amount of care to be repaid, which would then need to be paid back to them once the property is sold in the future.

Now, if the property had been owned as Tenants in Common, then we would recommend that both parties make their Will to leave their portion of the property to say, the children, and not the remaining spouse. This means that when the first person dies their share of the property would be given to the children (usually in equal portions). So, the property is then owned as 50% to the remaining spouse and the other 50% split between the children.

The benefit of this is that should the remaining spouse need care, because they do not own the property outright, the local authority cannot include it's value in the means testing calculations, therefore protecting the asset for the family.

Putting a property in Tenants in Common (or Severance of Tenancy) is a simple process and just involves altering the deeds with Land Registry. We can help with this if you need us to.

There are also other benefits relating to Inheritance Tax which can also be minimised by splitting the Tenancy, and again, we can offer help and advice if you need it.

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