Published on: 19th April 2021

Should I own my property as Joint Tenants or Tenants in Common?

A key question many clients ask is whether they should own their property with their Spouse/Partner as Joint Tenants or Tenants in Common. Usually, you would own a property as Tenants in Common for Estate Planning reasons, as we will explain in this article.

What is the difference?

The difference between owning a property as Joint Tenants as opposed to Tenants in Common is that a property owned as Joint Tenants by two individuals is owned equally by both parties, and when one of them passes away, the surviving partner will own 100% of the asset. With Tenants in Common, each party holds a clear interest in the property – this can still be equally held at 50/50 but may also be unequal if, for example, one party has put more money into the deposit to purchase the property. When one of the party passes away, their share in the property is distributed via their Will.

What are the Estate Planning implications?

There can be significant Estate Planning implications if you own a property as Joint Tenants. Here is an example of what can happen if a property is owned as Joint Tenants:

• Mr and Mrs Smith own a £500,000 house as Joint Tenants and have two children.
• Mr Smith sadly passes away.
• Mrs Smith then owns the whole £500,000 house solely.
• Mrs Smith then starts to not be able to cope at home on her own and needs to go into long term residential care.
• Because of her assets, a care fees assessment deems that Mrs Smith needs to pay for her own care.
• If Mrs Smith is in care for a significant amount of time, the property could be sold to pay for her care.
• The children could end up with nothing.

In this example, if Mr and Mrs Smith had owned the property as Tenants in Common and had an appropriate Trust in place, they could have protected Mr Smith’s share of the property for their children because it would not be included in any care fees assessment.

What about Sideways Disinheritance?

Owning a property as Joint Tenants can also lead to problems with Sideways Disinheritance as the example below shows:

• Mr and Mrs Smith own a £500,000 house as Joint Tenants and have two children.
• Mr Smith sadly passes away.
• Mrs Smith then owns the whole £500,000 house solely.
• Mrs Smith then meets and subsequently marries Mr Jones who also has two children.
• Mrs Smith and Mr Jones each have £500,000 and purchase a £1,000,000 property together and own it as Joint Tenants.
• Mrs Smith sadly passes away before Mr Jones.
• Mr Jones then owns the whole of the £1,000,000 house solely.
• When Mr Jones passes away he leaves the house solely to his children and Mr and Mrs Smith’s children get nothing.

In this example, if Mrs Smith and Mr Jones had owned the property as Tenants in Common and had the relevant Trust in place, Mr and Mrs Smith’s children would have been able to inherit Mrs Smith’s share of the property.

So what would we recommend?

Each individual circumstance is different and there are times (such as when the value of the Estate is very low) where owning a property as Joint Tenants may be the best option. For the majority of homeowners however, owning a property as Tenants in Common, whilst having the relevant Trust in place, is the best option as it helps eliminate the risk of the whole of a property being assessable for care home fees, and reduces the chance of Sideways Disinheritance.

If you are unsure about how your Estate Planning is set-up and would like to discuss appropriate options, then give our friendly and helpful team a call on 01732 868190 or get in touch via the contact form on our website.

======================================

Our Covid-19 policy is now that if you wish to give instructions or require general information about our Wills, Lasting Powers of Attorney or Trusts then we will carry out a telephone or Zoom appointment. However, if you wish to give instructions to one of our Consultants and you feel that you can only do this at a Face to Face meeting we are offering, at our Consultant’s discretion, a limited number of Face to Face appointments in most of the areas we normally cover (subject to Government advice). To see the areas we normally cover please click here. To arrange an appointment please telephone 01732 868190 or click here.

======================================

Back to all news