Advantages of "Tenants in Common"

wadewade · 18 February 2006 at 4:42PM

There is another reference in today's Times (Sat. Money Section page 8) to lots of people changing their joint ownership of their house from "Joint Tenants" to "Tenants in Common" which you can do for free by downloading a form from https://www.landregistry.gov.uk
It says this can have advantages on Inheritance Tax, etc., but there also seem to be potential snags.

Does anyone know whether it is really worth changing over?

margaretclare · 18 February 2006 at 6:42PM

AFAIK the only advantage is if there is a large estate and people are worried about the implications of IHT and/or house being sold to pay for long-term care.

I don't know - what are the potential snags?

We put ours into joint names after we married 4 years ago, we're 71/70 now. It was in my name alone up to then and I wanted to fulfil my wedding vows 'all that I have I share with you' and give him security if I died first.

Aunty Margaret

BertieMeldrew · 19 February 2006 at 6:00PM

I went on a retirement course some time ago and they strongly recommended this as a way of reducing your inheritance tax commitment.

This isn't to do with your house being in joint names - it is to do wth how the half that "belongs" to one partner is treated when they die. Doing it this way significantly reduces the inheritance tax that is payable. With the price of houses these days, and our stingy chancellor not giving IT a sensible threshold, it is definitely worth looking into.

I plan to amend our wills in the next few weeks to incorporate this change - but I advise that you do it via a solicitor who knows the ropes and doesn't rip you off (isn't "Solicitor" and "doesn't rip you off" an oxymoron?

)

There's plenty of stuff on the www to tell you more

Bertie

margaretclare · 20 February 2006 at 11:54AM

I personally would not want to do this.

We're not near IHT level, but even if we were...the scenario could be: first partner dies, survivor inherits only half of value of property they've lived in. Suppose he/she wants to sell up and move? Possible reasons: memories too painful, wanting to 'downsize' to somewhere smaller, wanting capital to live on (reduced income now on his/her own). But this is impossible: unless the heirs want to buy out the survivor's half (and possibly can't afford to) you can't sell half a house. Survivor then has very limited options, and because of increasing age, has no earning-power left.

B has said many times that if I die first he won't want to stay on here - memories would be too painful. He'd probably sell up and rent a bedsit somewhere. If he dies first I won't want to stay here either - I'd probably go for one of the 'park homes' we looked at recently, that B says are too small for both of us. Either way, leaving 50% of our house property to another generation is not an option. When we've both finished with it, the plan is for whatever is left to be divided between 5 grandchildren, 3 of mine and 2 of his. We feel this is the fairest way.

Aunty Margaret

[Deleted User] · 20 February 2006 at 12:46PM

we will be in IHT band and were advised to do the tenants in common route and also to do it via a trust via a special will. No way!! after looking into all this. It is highly unlikely that we will die at the same time. Neither of us wants to give up control of our possessions ie having to ask permission to downsize in order to release some money. The benefit of tenants in common, is to our offspring and not to us individually.

margaretclare · 20 February 2006 at 3:14PM

kittie wrote:

we will be in IHT band and were advised to do the joint tenants route and also to do it via a trust via a special will. No way!! after looking into all this. It is highly unlikely that we will die at the same time. Neither of us wants to give up control of our possessions ie having to ask permission to downsize in order to release some money.

Well put! My thinking exactly.

The benefit of tenants in common, is to our offspring and not to us individually.

I couldn't have expressed it better.

But isn't it the case that often it is the offspring who raise these kind of points, either because they want to avoid paying IHT on parents' estate (the deceased person isn't gonna pay!!) or because they want to avoid using value of house property to pay care charges should these become necessary. Pressure, emotional blackmail etc, can be put on the parents to get them to make these changes, which may not be in their best interests.

Kittie, I've seen a lot of discussion on this topic, but you're the first person who's thinking along the same lines as me.

Aunty Margaret

[Deleted User] · 20 February 2006 at 6:08PM

margaretclare wrote:

Pressure, emotional blackmail etc, can be put on the parents to get them to make these changes, which may not be in their best interests

You are so right!!! It is time for the oldies to put the other side to their relatives ie that most of us had to work our fingers to the bone to get what we now own. Why on earth should we ring fence a great big chunk for them.

SKIERS rule!!!

PS I have 3 lovely adult children and we all get on well but our future is now ours. We have done the whole child rearing thing, right through university and weddings. All are now in good jobs. We have done our bit and enough is enough. Time for me and my DH to look after each other, as a priority, now

vegtablepatch · 20 February 2006 at 6:23PM

OH and I are tenants in common which means we own 50% of the property each. We are married and asked a Lawyer recently if we should change to joint owners. Advice was there is no benefit and it is not in our interest to change. The only difference is if one needs residetial care when we get old the government will not have a right to take fees from 50% of the property. However, it is important to make a will leaving your interest in property to OH (assuming that is what you would want).

[Deleted User] · 20 February 2006 at 6:29PM

The benefit of joint tenancy is that the house would automatically pass to the surviving spouse. Making a will, as tenants in common, to pass the half of the house to the spouse defeats the purpose, which is usually to leave the half of the house to offspring. It is different for couples living together without marriage, when tenants in common is vital to protect each other

BertieMeldrew · 20 February 2006 at 11:58PM

I fully agree with the sentiment of "you can't take it with you"

and have no hangpups about spending what we have (neither do our children). However, when the time comes to catch the number 29 to the pearly gates I would rather my estate went anywhere other then Grabbit Browns coffers (or, hopefully, one of his many successors way down the line

!

As I understand it (and I am certainly no expert on these things) if you have a Tenants in Common agreement then when one partner dies their estate doesn't necessarily go to the children (or whoever)... it can be left to a trust fund - of which the surviving partner can be a (the?) trustee. All this means is that a whopping lump of IT eventually goes tax-minimised to the estate rather than being hit with full IT rate of 40%.

Of course, it depends entirely on the size of the estate etc etc

[Deleted User] · 21 February 2006 at 9:22AM

They have to have two trustees Bertie. We will not be beholden to anyone for the right to spend OUR money as and when either of us chooses. Most oldies don`t lose their marbles as they get older and are perfectly capable of making rational decisions

The point is that we do have a choice. If anyone wants to go the tenants in common route to ring fence one IHT band, then it is very important to go via the trust route and with an experienced solicitor. We had a quote, before we sat up and said "stop" (and it would cost about £600 to £800 to set up.) Thank goodness we had the lightbulb moment then, because it is all to easy to skim over the consequences for the surviving spouse

We were in danger of getting swept along by the IFA and the solicitor.

Advantages of "Tenants in Common"

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