Tenants in Common advice please!

bugbyte_2

Hi, after some advice please! Not sure if this should go in the deaths board or here.

We have been advised by a Will firm that we should split the house 50/50 as tenants in common. The thinking behind this is if my wife or I were to go into care, the house as an asset would be worthless (you can’t put a charge order on 1/2 a house) therefore it protects the house as an asset from care fees.

To achieve this, the Will firm proposes setting up a trust for each of us and placing a share of the house in each. This will cost £800. Is this good value? A quick search of the internet shows that to convert to tenants in common can cost less than £100 - but there is no mention of setting up trusts. Are trusts important to achieve protection against care fees?

Thanks in advance for any advice given.

lika_86

No idea but personally I'd seek advice from a solicitor rather than a will writing firm.

peachyprice

Firstly, are you sure you're not already tenants in common? You may have been asked when you bought the house whether you wanted to be joint tenants or TiC.

Secondly, check with your solicitor that they can't do the same for you for a whole lot less than £800.

Thirdly, is this going to be your forever home that you are still likely to still be living in when you are of an age to need a care home? If not, save your money and do it when you next buy.

Fourthly, if one of you has to go into care while the other is still living in the house, they can't touch it anyway.

Mr_Toad

bugbyte wrote: »

Hi, after some advice please! Not sure if this should go in the deaths board or here.

We have been advised by a Will firm that we should split the house 50/50 as tenants in common. The thinking behind this is if my wife or I were to go into care, the house as an asset would be worthless (you can’t put a charge order on 1/2 a house) therefore it protects the house as an asset from care fees.

To achieve this, the Will firm proposes setting up a trust for each of us and placing a share of the house in each. This will cost £800. Is this good value? A quick search of the internet shows that to convert to tenants in common can cost less than £100 - but there is no mention of setting up trusts. Are trusts important to achieve protection against care fees?

Thanks in advance for any advice given.

Well first off, speak to a solicitor.

The above info is very misleading!!

Have a look at the Land Registry site:
2 The two kinds of ownership

Your conveyancer will have assisted you in deciding which kind of ownership suited you when you either bought or were given the property. You can later change between the two kinds of ownership but this is not always easy and sometimes your kind of ownership changes even if you do not want it to.
Land Registry cannot advise you which kind of ownership is best for you.
2.1 Beneficial joint tenancy

Owning your property as beneficial joint tenants means the property belongs to you and the other owner or owners jointly. You must all act together as a single owner, for example on a remortgage or a sale. You do not own specific shares in the property and you cannot give away a share of the property in a will. If you die, your interest in the property passes automatically to the other owner or owners.
A beneficial joint tenancy ends when either:

• the whole property is transferred to one owner
• the tenancy is converted into a tenancy in common, whether voluntarily or involuntarily, for example if one of the owners becomes bankrupt
• the property is sold to someone else, or
• one owner outlives all the others.

2.2 Tenancy in common

Owning property as tenants in common means the property belongs to you jointly but you also own a specific share of its value. You can give away, sell or mortgage your share. If you die, your share of the property passes to the beneficiary in your will. This type of ownership is reflected by an entry on the register for the property known as a Form A restriction:
Form A restriction: “No disposition by a sole proprietor of the registered estate (except a trust corporation) under which capital money arises is to be registered unless authorised by an order of the court.”
The effect of this restriction is that if you are the last survivor of all the owners you must appoint another person to act with you in any deed of sale or mortgage and to jointly receive any sale price or mortgage advance.
A tenancy in common ends when either:

• you all sell the property (with all the shares) to someone else
• you all convert to a beneficial joint tenancy, or
• one owner acquires all the shares in the property.

A tenancy in common does not automatically end when all the original owners have died. It will continue unless one person has become the owner of all the shares or the property is sold. The law makes provision about who can become the registered owner or who can sell the property when this happens. Your conveyancer will advise you.
- See more at: http://www.landregistry.gov.uk/public/guides/public-guide-18#sthash.MzkRzXwB.dpuf

http://www.landregistry.gov.uk/public/guides/public-guide-18

If either of you go into care the house is disregarded as the remaining partner is still living in it irrespective of common or joint tenants.

As far as care home fees goes the type of agreement is pretty much irrelevant. I speak from experience as my father went into care, Mum stayed in the house.

It looks to me like the Will writing company is looking to increase their fee by doing something which may well be unnecessary in your position.

Also be aware that doing anything that could be construed as deprivation of assets and a trust fund is one such thing you will probably be assessed as still having that asset.

Again, see a solicitor!

Mojisola

bugbyte wrote: »

We have been advised by a Will firm that we should split the house 50/50 as tenants in common. The thinking behind this is if my wife or I were to go into care, the house as an asset would be worthless (you can’t put a charge order on 1/2 a house) therefore it protects the house as an asset from care fees. .

If this is what they have said, they don't know the law or are lying to you.

If one of a couple needs care, the value of their home is not counted when the financial assessment is done.

Changing to tenants in common can protect some of the value of the house if the survivor of the couple needs care. When the first of the couple dies, the will can leave their share of the house to someone other than the spouse. The will should set out that the survivor has the right to live in the house as long as they want and/or sell up and use the whole value to buy something else.

In other words, the inheritance is delayed until after the second death.

You don't need an £800 trust to do this.

For severance information -
https://www.landregistry.gov.uk/public/guides/public-guide-18#guide-mark-12
https://www.landregistry.gov.uk/_media/downloads/forms/SEV.pdf

bugbyte_2

Thanks for the excellent replies.
We are currently Joint owners, mid 40's, no health issues, happily married, 2 kids, no plans to move in the next ten years, slightly below the inheritance tax threashold.

We were told that as Joint owners, if one of us was to go into care yes the other would still live in the house but the council could place an order on the house to recooperate the cost of care from the estate once we both die. By being tenants in common the house effectively has a nil value and therefore no order can be placed - i.e. the total benifit goes to the children. Is this a fair summary of the situation?

Or is it as Mojisola and Mr Toad says and the house has a nil value until the survivor goes into care and only then is the house taken into consideration?

Thanks

RAS

Frankly, the governments have changed the rules on this so many times in the last 20 years that doing this sort of thing NOW is highly unlikely to be of any use by the time you get to be of an age when it matters.

What will definately happen if you become tenants in common is that you lose the automatic transfer of equity when the first tenant dies.

As joint tenants you both own the whole of the property. So on the death of the first tenant, the sole survivor owns the lot and the value of the house is excluded from IHT considerations. As tenants in common, when the first tenant dies, half the value of the house is included for IHT purposes.

Which is probably why the trusts are being suggested.

The other practical consideration you both need to think about is that if half the house value is left to the children, you may trap the remaining partner in house because they cannot move, there may be problems if one of the children divorces or is made bankrupt etc.

margaretclare

I think this organisation is scaremongering. 'Going into care' are words that act like a dog-whistle, like 'going to the workhouse' was a scare for earlier generations.

It's a fact that a majority of people never need to go into care, even if they require help at home, this is cheaper than upping sticks and going into a 'home'. Even if one does, the other one's right to live at home can't be challenged. In any case, it's going to be a very looooong time before you even need to consider this, and anything can happen in the intervening decades.

Crabapple

RAS wrote: »

As joint tenants you both own the whole of the property. So on the death of the first tenant, the sole survivor owns the lot and the value of the house is excluded from IHT considerations. As tenants in common, when the first tenant dies, half the value of the house is included for IHT purposes.
.

The IHT is only an issue if the property is passing to non-exempt beneficiaries, ie. a spouse. If you co-own as joint tenants with children for example it would still be taken into account for tax purposes, although not included in the estate for Probate or be left by the Will. If you co-own as tenants in common with your spouse you won't pay IHT.

I think that the will writers here are trying to make some extra money from you. Owning as tenants in common is not a magic potion against care fees either, there is still up to the value of half the house that can be secured and repaid later.

At your age it also seems a little pointless, as others are saying, who knows what the rules might be in a few years let alone if and when you need care.