Tenants in common

oap

Hi, a friend of mine has been advised to put her and her husband's house in Tenants in common, rather than joint names, this has been done with a Solicitor.

Apparently if one of you has to go in a home then they can only take half of the house when the time comes after you have both passed on, rather than the whole amount if it is necessary.

Has anybody done this? Also is it true that if you have dementia or Alzheimers etc, that you are not charged anything in a home of your choice.

Thank you, oap

Willman_Rodders

Hi OAP,

Financial advisers, will writers, solicitors, and tax specialists continually look to find ways to reduce tax, and protect assets. The two most common forms of 'attacker' are HM Customs and Revenue - who want inheritance tax, and Social Services - who want your estate to fund long term care costs.

It is important to appreciate that this is an ongoing battle; minds far greater than mine find loop holes within existing legislation and use these to defend property from these attacks; when the trickle of money escaping by these routes turns into a river (or in certain cases a stream) the outlet is blocked by the authorities. So, firstly what works today, may not work tomorrow.

The next point I wish to make is that yes, there are effective ways at the moment to protect your property from being forcibly sold to fund long-term care. But before you rush off and follow them you also need to be aware of the risks of so doing. Many surviving spouses have found themselves far worse off (and, being sceptical, their adviser far richer) as a result of including complicated trusts within their wills.

Many people fear their house being sold to fund long-term care (LTC). But as your post indicates you can only protect 50% of the property - not 100%. If we assume your property value is £300,000, then you can (possibly) protect £150,000. But if LTC costs say £25,000 p.a. that means that your surviving spouse will have to be in LTC for 6 years before they start to even look at the second half of the property. Some people do go into LTC for longer than this, but for the vast, vast majority of people a much, much shorter time frame is evidenced. In the meantime your surviving spouse, who may never even need LTC, will have lost control of their house (because half of it will be in trust), and may well find undue pressure being put upon them by their family members (the trustees).

Finally, be aware that Social Servicies can under the 'care in the community' legislation challenge why such evasive action was taken. What they are looking for is to prove you were trying to deliberatly deprive the nation of funding for long term care. If they win, your family may be asked to fund the surviving spouse's care costs. And if you are already showing signs of dementia (or other debilitating diseases) you have probably left it too late to take this action anyway.

Changing the property tenancy from 'joint tenants' to 'tenants in common' is only a part of the process required. Your wills will need to be updated - and as they will include specific trusts you will probably have to pay several hundreds of pounds for these. You should also consider making 'enduring powers of Attorney' at the same time.

The funding of care is complex. Certain parts are paid for by the State; others the State expects you to pay. Confusion exists (or at least we assume its confusion rather than deliberate errors) in the NHS/Social services departments as we hear of some people benefiting from State support, whilst others do not - but both have the same symptons and level of care requirements. However I have not heard of any special arrangements for people with dementia.

My recommendation:
1. Search and read this site; I have answered a number of related posts in recent weeks (and I have only been responding for a couple of weeks) so I guess there is a large amount of information already available on this site).

2. Seek specialist advice.

3. Ensure you know the risks, as well of the benefits.

4. Make the decision as to whether its right for you, or not. (Many of my clients decide not to proceed on hearing of the risks.)

margaretclare

Hi Rod

You have put this so very clearly. It's true that this type of question gets asked over and over again on Martin's site, also on other sites like the AgeConcern and HelptheAged discussion boards. There are an awful lot of misconceptions around, a lot of what you might term 'urban myths' or pub talk. People use phrases like 'protecting an inheritance', 'protecting property from being used to pay for care'. In some cases the people concerned are a very long way from needing to consider such a possibility, you hear 'my parents are in early 60s, fit and active, but they may need long-term care paid for'. Well, that may be 20+ years ahead, and who knows what the world will look like then, what possibilities will exist and what will not.

For myself and DH, I could not contemplate any of those complicated and convoluted 'trusts'. There are risks, as you outline. I'm in my second marriage, DH is in his third. We both have other families. The title to our property is in joint names and that's how it will stay.

Margaret

moonrakerz

margaretclare wrote: »

For myself and DH, I could not contemplate any of those complicated and convoluted 'trusts'. There are risks, as you outline. I'm in my second marriage, DH is in his third. We both have other families. The title to our property is in joint names and that's how it will stay.

Margaret

Margaret, you have posted many times showing your apparent dislike of many schemes to reduce IHT, CGT etc, etc. If you wish to pay more than me - that's fine ! it's your money

But, for the vast majority of people setting up a trust is not a "complicated and convoluted" evolution. Looking at you and DH's history, with other families from previous marriages I can see that yours might be a more complicated trust than most.
For most people a few hundred pounds spent on setting up a trust is well worth it.

Mrs_pbradley936

We have just done this with some property we own (not our home). We did it so that each of us could use up our inheritance tax threshold. The reason we did not do it on our home was a) because we did not need to as we own other property and b) because neither of us wanted scheming family to be trying to put us out of our own home in the years to come. It is all very well thinking your children would never do such a thing but you never know. Our children our welcome to anything we leave but we will not inconvenience ourselves financially or mentally/emotionally in the meantime.

margaretclare

moonrakerz wrote: »

Margaret, you have posted many times showing your apparent dislike of many schemes to reduce IHT, CGT etc, etc. If you wish to pay more than me - that's fine ! it's your money

The fact remains that we, as individuals, are often being approached by people who do not know our personal circumstances with the blanket proposal 'you should have the property's title as tenants-in-common rather than as joint tenants'. The fact that we deliberately made that choice tends to escape these well-meaning folk. The title was in my name alone and I wanted to give my DH the security of knowing this property is his as much as it is mine.

Regarding IHT and CGT, it is unlikely that either of these will be relevant to us at any stage. Although we're both still saving, and given another 20 years' lifespan, who knows what our assets may be worth then?

In addition, we are not worried about using our assets to pay for any care at any level in the future. I hear it said so often 'protecting our assets from care costs'. And yes, I've said this before, and I don't apologise for repeating it - if you are not willing to pay for your own care then who do you imagine is going to pay for it?

This type of question does come up so often, Willman Rodders has given a very clear breakdown of the possibilities. Often it's just hearsay: people say 'apparently...' as the OP has done, but there are other ways of finding out factual information than posting on a discussion board, where you'll get other people's opinions but often, not the facts.

Margaret

[Deleted User]

Margaret is not the only sensible one. My dh of 37 years and I are also joint tenants. Margaret is a very astute lady and so am I, in fact I successfully manage my DHs pension in a sipp. Our affairs are straightforward

If (when) my DH or I dies then the other will decide what to do with the estate. Not our children or some executor. If he wants to travel the world then so be it. If I want to give chunks away to our children, or to a charity, then so be it

We all have the 7 year option and personally we have the ability to downsize to release capital to do with as we wish as individuals

If by some mis-chance we die together then there will be ample left for the family after iht and to be honest we won`t care about the tax. If we live to a very old age then we can opt for platinum star nursing homes using our joint assets for us, ourselves

margaretclare

Thanks for the nice words, Kittie, and I completely agree with you.

What DH and I both think is that if/when one of us is left here on his/her own the survivor will not want to carry on living here. It's not a matter of 'downsizing' - you can't 'downsize' much from a 2-bedroom bungalow - but the memories would be just too painful. We haven't been together as long as you, Kittie, but perhaps because it's 'second time around but not second-best' we enjoy each other's company, we love being together, we do things together. I'm probably not going to be well enough to go on our long-planned trip to Niagara in July - awaiting pelvic floor surgery - but although the people over the pond are more his friends than mine, he flatly refuses to go alone. He has no interest in going anywhere without me. But as Kittie says, WE decide, or the survivor decides, not some executor, not our children, not some trustees. What the survivor would be likely to do would be to sell up and rent somewhere and as Kittie says, use the money for whatever we like at the time.

Margaret

seven-day-weekend

Margaret and Kittie, I totally respect your point of view and believe that it is (and should remain) totally your decision as to what to do with your assetts.

However, there are also people around who WANT their children to have an inheritance. We have one son, he is not ever likely to have his own property for various reasons, it is a great worry to us that he may one day lose his home (our house in the UK).

Therefore we are seriously thinking of putting the house as tenants-in-common precisely so that we can protect his inheritance as much as we are able. We understand the downsides of it.

We are not people who scrimp and save just to leave an inheritance, in fact we will almost certainly spend much of our money travelling (including, in the future, the proceeds of the sale of our Spanish house). The only assett we are worried about is our UK house which is also our son's home.

There are other options, but the tenants-in-common one seems best for all of us. This is why we are seriously considering it.

Any/all input gratefully received.

Errata

oap wrote: »

Hi, a friend of mine has been advised to put her and her husband's house in Tenants in common, rather than joint names, this has been done with a Solicitor.

Apparently if one of you has to go in a home then they can only take half of the house when the time comes after you have both passed on, rather than the whole amount if it is necessary.
That's correct

Has anybody done this?
Yes, I helped my parents to do it

Also is it true that if you have dementia or Alzheimers etc, that you are not charged anything in a home of your choice.
No, that's not true in England and Wales

Thank you, oap[/QUOTE

Hope this helps.

Errata

Rodders, I'd just like to make the point that whilst sm*art*rse financial advisors and legal eagles are finding loopholes so people won't have to pay for their care, amongst the people who will be forced to pay for it through local and national taxation are pensioners.