Advantages of "Tenants in Common"

margaretclare

BertieMeldrew wrote:

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.

But as Kittie says, there have to be TWO trustees. So the surviving spouse (in the scenario that I posited) wants to sell up and move. Suppose the second trustee does not agree to this, for whatever reason? Unnecessary hassle and stress for the grieving survivor, at a time when extra hassle and stress are not needed.

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

I think we are in the best possible position - nowhere near poor but not rich enough to have to worry about IHT.

Aunty Margaret

moonrakerz

kittie wrote:

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.

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.

IF you have an estate that is likely to attract Inheritance Tax you really are throwing money away by not giving very serious thought to planning against it.

If Kittie's potential estate is below the IHT level, fine, don't spend £6-800 now, if it is likely to exceed the limit - splash out - your estate will benefit hugely.

As the value of most people's estates is made up from property, I don't really understand the comments about being "beholden to anyone" and "the right to spend OUR money". The only way you can spend your money is to sell your house and buy a tent. If your estate does not have enough cash to pay the IHT the house may have to be sold to pay it off.
I fear the "lightbulb moment" may have blinded her to the realities of what is being discussed in this thread.

margaretclare

moonrakerz wrote:

As the value of most people's estates is made up from property, I don't really understand the comments about being "beholden to anyone" and "the right to spend OUR money". The only way you can spend your money is to sell your house and buy a tent. If your estate does not have enough cash to pay the IHT the house may have to be sold to pay it off.

If you look at Kittie's post no. 5 in this thread she makes clear what she means by the comments which you don't understand.

She's concerned about 'trustees' being involved in any decisions she and/or her husband make in later life. She prefers to make her own decisions. She's also a little concerned about the possibility of those 'trustees' being people who're not, shall we say, totally independent, who may have the proverbial axe to grind, thinking about their inheritance.

I can relate completely to where she's coming from!

Aunty Margaret

matto

There is a well known saying by Lord (Roy) Jenkins

“the people who pay inheritance tax are those that distrust their relatives more than they dislike the Inland Revenue.”

margaretclare

matto wrote:

There is a well known saying by Lord (Roy) Jenkins

“the people who pay inheritance tax are those that distrust their relatives more than they dislike the Inland Revenue.”

And there's also an old saying: 'Where there's a Will....there's relations'.

I once chatted to a solicitor. She said: 'You only have to sit in this chair at my desk for a while, to see the very worst of human nature. Loving family members can change into greedy, grasping human sharks when the word "inheritance" is mentioned'.

While I don't have any reason to distrust family members, I can understand what kittie says about wanting to stay in control of her assets for as long as possible.


Aunty Margaret

Dora_the_Explorer_5

Most people trust their relatives because they've never been in a situation that has tested that trust. Quite agree with the solicitor's view of people. If all financil matters are agreed, understood and written up in some form - trust is unecessary as everyone knows what they can and can't do.

moonrakerz

This thread is titled "Advantages of Tenants in Common". The simple answer to that is probably "none".

UNLESS you are likely to pay inhertitance tax when the second death takes place in a couple AND you have a proper drafted Will and package of measures to minimize IHT.

If you have a property worth £500,000 as joint tenants, when the first one dies it goes to the survivor, if they are married, no IHT is payable. When the seond one dies IHT is payable on £500,000 - £285,000 = £215000 X 40% = £86,000. A lot of money, by any one's standards. (You get 6 months to pay this - where do you get the cash from ? sell the house ? that will cost you a few thousand more in legal and Estate Agents fees)


If you are tenants in common, this makes use of both IHT allowances. On the first death his (her) share of the property, £250,000, pays no IHT. However this half of the property must then be held in such a way to ensure that this status is upheld to no disadvantage to the survivor. When the survivor dies, their half is also below the IHT threshold - no IHT. Total saving £86,000 !

This is why you must see a Solicitor to draft a proper Will and take the necessary action to safeguard the half of the property following the first death.This where Kittie and Margaretclare have expressed concerns.

Two very important points to remember:

1. A will is YOUR statement of wishes.
2. YOU select the Trustees, if you don't trust them, find someone else. You can dictate exactly what they can and cannot do.

I did this about 6 years back, it cost me less than £500, and the savings to my estate were similar to my example above. I am not rich, I have bought my own house over the last 30 years and my mother's house came to me.
I or my wife , whoever died last, would have made a large contribution to that nice Mr Brown - I paid enough when I was alive, I didn't intend paying any more than I have to when I am dead !

BertieMeldrew

moonrakerz wrote:

This thread is titled "Advantages of Tenants in Common". The simple answer to that is probably "none".

UNLESS you are likely to pay inhertitance tax when the second death takes place in a couple AND you have a proper drafted Will and package of measures to minimize IHT.

...

...would have made a large contribution to that nice Mr Brown - I paid enough when I was alive, I didn't intend paying any more than I have to when I am dead !

Thanks MR... it was something like that I wanted to put in my earlier posts... you captured it all v.well. Esp. the Mr Brown bit

When you consider the avg house price these days then one hell of a lot of people will benefit by doing this...

[Deleted User]

moonrakerz you have overlooked the fact that those of us in houses over the IHT band are perfectly capable of downsizing at will. Where I live, in a new leasehold house on a gorgeous development, there are two bedroomed apartments and buying one would release £100,000 at a stroke, to be spent on whatever we choose. Could be holidays, gifts to children or whatever. This is part of our long-term plan. Also money/goods may be gifted bearing in mind the 7 year clause, after which the gift becomes completely free of IHT. The 7 years is a sliding scale

I admit that people do have to be pretty strong-willed not to be swept away by the `all-knowing, fee-earning` IFAs and solicitors but then, there aren`t that many people who can think for themselves. Look around, those of you who have big houses and don`t be scared to make the downsizing decision, rather than getting trapped in a trust

I have to say that we do not intend to duck and dive away from IHT but we do intend to make some sensible decisions re the potential cost of care etc. I would choose for example, to spend on a high standard nursing home rather than minimum standard. If at the end of our lives there is more than the IHT allowance, of £275000, I believe that is more than enough for our children. If the government want 40% of the rest then so be it

ps we are not rich either. We own our own home and have worked very hard all our lives. Neither of us have inherited a property or more than £6000 in a legacy

[Deleted User]

I have missed out the fact that we could, later in life, also take out an interest-only mortgage on the last property so that we would never be scrimping along.

I must say that financial planning is all important and to that end we are also in the process of moving our main pension to a sipp, which I have already set up and will be managing myself

I need not have mentioned that, but the financial planning for retirement and beyond should be dealt with as a whole.