Joint Tenants or Tenants in Common?

wealdroam

Hi, I hope you can help.

I have inherited a flat which I plan to let.
We have got to the stage where the legal transfer of ownership is taking place.

I and my wife are trying to understand the implications of income tax and capital gains tax, and how best to reduce our liabilities in this respect.

It seems to be better for my wife and I to jointly own the property.
This would mean that we would share any tax liability on the income, and again share the liability for capital gains tax when the time comes to sell the place. If the property was transferred to me in my sole name, there is the possibility that my income may creep over the threshold where the higher age-related income tax allowance starts to be reduced.
Is that the reasonable way to go?

If we do go for joint ownership, would it be more appropriate for 'the property to be held on trust for ourselves as joint tenants', or should we 'hold the property as tenants in common in equal shares'?
My view is that we should go for the 'joint tenants' approach, but I wonder whether that is the right view?

Thanks for any help you can offer.

taxsaver

I would strongly recommend Tenants in Common as this will then allow you both far greater flexibility with regard to planning for Income Tax, CGT and IHT.

SuzieSue

Holding the property jointly will probably save you tax, however, remember that your wife will own her half and should you divorce, she will be entitled to half the value of the property.

I'm sure you don't think you will ever divorce, but neither did my friend who held both his flats jointly with his wife for tax reasons and then ended up having to buy her out when she left him.

Errata

Tenants in Common means that you can specify the percentage each tenant owns - 50/50, 50.40, or even 95/5 if you're so minded.

taxsaver

SuzieSue wrote: »

Holding the property jointly will probably save you tax, however, remember that your wife will own her half and should you divorce, she will be entitled to half the value of the property.

I'm sure you don't think you will ever divorce, but neither did my friend who held both his flats jointly with his wife for tax reasons and then ended up having to buy her out when she left him.

In all but the shortest of marriages the property would be taken into account in any settlement, regardless of who owns it!

SuzieSue

taxsaver wrote: »

In all but the shortest of marriages the property would be taken into account in any settlement, regardless of who owns it!

There is a big difference between a 30 year marriage with children and a ten year marriage without children. I would be very surprised if someone had to give away 50% of an inheritance which was in their sole name if they had been married for 10 years or less and didn't have children.

taxsaver

I never said 50%; simply that it would be taken into account in any settlement! Also, the court recognises different marriage lengths with the 'magic' time generally being 6 years.

SuzieSue

taxsaver wrote: »

I never said 50%; simply that it would be taken into account in any settlement! Also, the court recognises different marriage lengths with the 'magic' time generally being 6 years.

No, but we were talking about owning a property jointly, which, unless it is held as tenants in common and the proportion held by each person specified, will be treated as held 50:50 and so the person inheriting the property would lose 50% if his wife left him so he would be better off holding it in just his name unless the length of his marriage means that she would be entitled to 50% anyway.

taxsaver

I think you need to re-read the OP, the clue is in there.

Seanymph

I put an ex on as a 'tenant in common' on a property for those reasons, and was able to effectively take him off the property with a visit to a solicitor and a couple of signatures.

It was easy.

If we were joint tenants I couldn't have done that.

You have to pick what suits you - but personally I'd be taking advice from my solicitor - mine, not a joint one, one that looked out for MY future.

Do you have children? It may be an idea for you to have it in shares with them instead?

SuzieSue

taxsaver wrote: »

I think you need to re-read the OP, the clue is in there.

No, just because they are over pension age, doesn't mean that they have been married a long time or even known each other a long time.