Tennant in Common - Problems with Inheritance Tax?

Robert_Sterling

elliebean wrote:

That's right, providing all beneficiaries agree, it is in effect rewriting the Will of the deceased.

I do not think that ALL the beneficiaries have to agree.
I think that only those beneficiaries WHO ARE AFFECTED by the changes have to agree.

Example

Originally A gets 50%
B gets 40%
C gets 10%

Varied to

A gets 45%
B gets 45%
C gets 10%

Only A and B have to agree to the variation.

margaretclare

elliebean wrote:

First of all, let me say that nobody can be forced to sell their home to pay care home fees. However, a charge can be placed against a house towards fees, but only in certain circumstances.

That being the case, WHY does this question arise so very often, and why is the - what almost amounts to - hysteria about this possibility? If you go to e.g. the AgeConcern or Help the Aged discussion boards you'll see it couched in very emotive language, words like 'the council grabbing/taking/stealing'.....

I have pointed out on numerous occasions that this is scaremongering, and in any case, it is a minority of people who end their days in long-term residential care - that means that the majority don't! 'Oh but it said on "Panorama" or "I read it in the "Daily Mail" ' etc.

The question also has to be asked: if an elderly person is living alone and then goes into long-term residential care, and if he/she owns a substantial asset such as a house, what is wrong with him/her using her assets to fund that care? I usually hear 'I paid taxes all my life (or mum/dad, or grandparents did)'. My response to that is I am STILL paying taxes, have been paying income tax since 1952, and will be paying tax for the foreseeable future!

Secondly, tenants in common is still a better way to preserve the value of your property against care home fees than owning it as joint tenants. If one parent has to go into care and the other spouse is still living at home the house is disregarded. The only problem comes if the second spouse dies or needs to go into care. If the second one died, and they owned their property as joint tenants, the whole property would transfer to the person in care and the charge could be placed against the value of the whole property instead of just half of it, which would be the case if they owned it as TIC.

So severing the tenancy has double benefits. It enables your parents to set up Nil Rate Band Discretionary Trusts in their Wills and also protects some of the value of their property should one or both need care in the future.

We own this property as joint tenants and we have an equity release 'lifetime mortgage' against it. We chose joint tenants because that's the way we wanted it. However, there may be some merit in changing. We are NOT among the group of people who seem to live their whole lives in fear and trembling of 'the house being snatched by the council' just because they saw it on 'Panorama'. However, it may be a thought.

Margaret

EdInvestor

Why doesn't everyone do deeds of variation and set up Discretionary Trusts post someone's death if that helps the IHT side of things?

Probably because they don't know they can until it's too late.

Doesn't the deceased person's view count?

It's assumed, probably correctly, that the deceased wouldn't mind if the idea involves tax saving, but personally I tend to find the idea of beneficiaries rewriting wills rather unsettling as well.

davelewis

If the home is owned as "Tenants in Common" then the whole property passes to the surviving partner. The deceased partner cannot leave it to anybody in the will because technically the property is owned by a trust of which the partners are the beneficiaries. After the death of the first person the remaining partner is the beneficiary and can leave it to somebody in a will.

N.B. A "Tenants in Common" property cannot be passed on in a will.

I think you have this the wrong way round. I am currently doing the Legal Practice Course and worked for the Land Registry for 6 years. In my experience;

Joint Tenancy - suvivorship - property cannot be passed on in a will.
Tenancy in Common - property can be passed on in a will - no suvivorship.

Please do let me know if i am wrong - if so i had better go back to the law books!!!

margaretclare

davelewis wrote:

If the home is owned as "Tenants in Common" then the whole property passes to the surviving partner. The deceased partner cannot leave it to anybody in the will because technically the property is owned by a trust of which the partners are the beneficiaries. After the death of the first person the remaining partner is the beneficiary and can leave it to somebody in a will.

N.B. A "Tenants in Common" property cannot be passed on in a will.

I think you have this the wrong way round. I am currently doing the Legal Practice Course and worked for the Land Registry for 6 years. In my experience;

Joint Tenancy - suvivorship - property cannot be passed on in a will.
Tenancy in Common - property can be passed on in a will - no suvivorship.

Please do let me know if i am wrong - if so i had better go back to the law books!!!

Hi

As I understand it (and I'm no expert):

Joint tenancy: property is owned 100% by 2 people and when one dies the property is therefore owned 100% by the surviving partner, who can then leave it in his/her will, sell it and move, whatever.

With tenants in common this isn't the case. On the death of one partner only 50% passes to the survivor. The first deceased will usually have specified in a Will who is the beneficiary of their 50%.

This can have implications e.g. if the surviving spouse wants to move to somewhere more convenient, can't live with the memories etc.

I recently heard of an instance in which father had died leaving his property to 2 sons. One was unmarried and had always lived with dad. Bro was living with a partner but wanted to know 'how he could realise his financial interest in the property' that he now owned with his (resident) brother.

My feeling is that by ducking and diving to avoid IHT and/or care charges, the problem can be escalated to another generation. Why leave a property jointly to 2 sons - someone obviously thought it was a good idea, but when one wants to live there and the other just wants his half of the value, it's difficult, isn't it?

Margaret

moonrakerz

margaretclare wrote:

Hi

As I understand it (and I'm no expert):

Joint tenancy: property is owned 100% by 2 people and when one dies the property is therefore owned 100% by the surviving partner, who can then leave it in his/her will, sell it and move, whatever.

With tenants in common this isn't the case. On the death of one partner only 50% passes to the survivor. The first deceased will usually have specified in a Will who is the beneficiary of their 50%.

I would agree with you there Margaret !

This is what worries me about DIY Wills/TICs/Variations etc, etc - it is SO easy to get it wrong, for whatever reason. It may be that you don't understand it or even something like a simple typo.

Get proper legal advice for these things, it is money well spent. If the Solicitor gets it wrong, he can be sued for his mistakes. If you get it wrong:
a: you are probably dead
b: any damages would have to come out of your estate, which may well have had to shell out large sums in Inheritance Tax already because you got it wrong.

djohn2002uk

margaretclare wrote:

The question also has to be asked: if an elderly person is living alone and then goes into long-term residential care, and if he/she owns a substantial asset such as a house, what is wrong with him/her using her assets to fund that care? I usually hear 'I paid taxes all my life (or mum/dad, or grandparents did)'. My response to that is I am STILL paying taxes, have been paying income tax since 1952, and will be paying tax for the foreseeable future!

Margaret

Margaret, I have posted in the past on how I strongly disagree over selling ones assets to pay for care although you have repeated these comments a few times and i really do see little or no difference between having care for free and having central heating improvements for free.

margaretclare

Ah, the central heating improvements are a tidgy amount compared with the cost of several years living in care. And we were prepared to pay for the heating upgrade ourselves, in fact we had budgeted to do so! It was a pleasant and unexpected surprise to find that we qualified to have this funded by DEFRA. The money comes from what the gubbmint has to spend to reduce this country's CO2 emissions and to comply with international agreements. The only other thing I've had for free was a 'Skills for Life' programme leading to Level 2 Numeracy (those 'gremlins' ads on TV).

However, nothing is free. Everything has a cost and that cost has to come from somewhere. I remain unconvinced as to why you're so unwilling to pay for your own care, should that become necessary. Bearing in mind that it's only a minority who will need the full-blown 24/7 residential care. A lot of 'care' is given in people's own homes.

Margaret

elliebean_2

Well it's all as clear as mud for me. Have just called the Probate and IHT office and was told that ownership of property can't be changed in retrospect after someone has died. So am back to square one. Why on earth did the solicitor offer to do a DoV to sever the property then ?

I can only think that the person at the Probate office misunderstood you, as I know a tenancy can be severed post-death by Deed of Variation. It is not strictly speaking changing the ownership of the property - the owners remain the same - but the way in which they own it.

Robert_Sterling

sloughflint wrote:

Why doesn't everyone do deeds of variation and set up Discretionary Trusts post someone's death if that helps the IHT side of things?

The majority of people do not pay any IHT at present.