Tenants in Common vs. Joint tenancy – Question

benny5

This was previously posted on the ‘house buying renting & selling’ Forum but it was suggested I move it here.

A property is held as Tenants in Common by partners A and B (with both having wills bequeathing their shares to their children), will the beneficiaries have any claim on their share in the event of the death of either partner? Or will they have to wait for both partners to pass away?

I have seen something to the effect that the surviving partner can retain a lifetime interest in the whole property. 

However, I have also heard that a beneficiaries’ stake in the deceased estate can be regarded as an asset in the event of divorce/bankruptcy and could complicate matters prior to the death of the surviving partner.

I realise this is a very complex issue but any points would be appreciated.  

getmore4less

Read up on IPDI trust.

You are describing two different scenarios where in one situation there a life trust and the other where the beneficiaries get their share absolutely.

Mojisola

benny5 said:

A property is held as Tenants in Common by partners A and B (with both having wills bequeathing their shares to their children), will the beneficiaries have any claim on their share in the event of the death of either partner? Or will they have to wait for both partners to pass away?

I have seen something to the effect that the surviving partner can retain a lifetime interest in the whole property.

This would have to be written into the wills.

doodling

Hi,

To be clear.  If the house is owned as tenants in common and the house is bequeathed to someone other than the other tenant then:

• If the will grants the second tenant the right to reside in the house for the rest of their lives (effectively a trust) then that beneficiary doesn't get the benefit of ownership until the second Tenant has passed and for most purposes they don't own it.
• If there is no provision in the will for the second tenant to reside in the house then both owners have equal rights and either of them can force a sale (or have their creditors force a sale), have the house taken into account in divorce proceedings, etc.

It would be unusual for a spouse not to give their partner a life interest in their will if the house is held as Tenants in Common.  There are various additional things that can be done in the will to allow for the remaining Tenant to move, downsize, etc. 

benny5

doodling said:

Hi,

To be clear.  If the house is owned as tenants in common and the house is bequeathed to someone other than the other tenant then:

• If the will grants the second tenant the right to reside in the house for the rest of their lives (effectively a trust) then that beneficiary doesn't get the benefit of ownership until the second Tenant has passed and for most purposes they don't own it.
• If there is no provision in the will for the second tenant to reside in the house then both owners have equal rights and either of them can force a sale (or have their creditors force a sale), have the house taken into account in divorce proceedings, etc.

It would be unusual for a spouse not to give their partner a life interest in their will if the house is held as Tenants in Common.  There are various additional things that can be done in the will to allow for the remaining Tenant to move, downsize, etc. 

Given that the main asset is a property and not likely to be subject to the IHT then the only advantage of the TiC may be to protect beneficiaries’ entitlements against later care costs or remarriage of a surviving partner.

doodling

Hi,

benny5 said:

doodling said:

Hi,

To be clear.  If the house is owned as tenants in common and the house is bequeathed to someone other than the other tenant then:

• If the will grants the second tenant the right to reside in the house for the rest of their lives (effectively a trust) then that beneficiary doesn't get the benefit of ownership until the second Tenant has passed and for most purposes they don't own it.
• If there is no provision in the will for the second tenant to reside in the house then both owners have equal rights and either of them can force a sale (or have their creditors force a sale), have the house taken into account in divorce proceedings, etc.

It would be unusual for a spouse not to give their partner a life interest in their will if the house is held as Tenants in Common.  There are various additional things that can be done in the will to allow for the remaining Tenant to move, downsize, etc. 

Given that the main asset is a property and not likely to be subject to the IHT then the only advantage of the TiC may be to protect beneficiaries’ entitlements against later care costs or remarriage of a surviving partner.

Agreed.  There is generally no IHT benefit in owning as Tenants in Common.

getmore4less

doodling said:

Hi,

benny5 said:

doodling said:

Hi,

To be clear.  If the house is owned as tenants in common and the house is bequeathed to someone other than the other tenant then:

• If the will grants the second tenant the right to reside in the house for the rest of their lives (effectively a trust) then that beneficiary doesn't get the benefit of ownership until the second Tenant has passed and for most purposes they don't own it.
• If there is no provision in the will for the second tenant to reside in the house then both owners have equal rights and either of them can force a sale (or have their creditors force a sale), have the house taken into account in divorce proceedings, etc.

It would be unusual for a spouse not to give their partner a life interest in their will if the house is held as Tenants in Common.  There are various additional things that can be done in the will to allow for the remaining Tenant to move, downsize, etc. 

Given that the main asset is a property and not likely to be subject to the IHT then the only advantage of the TiC may be to protect beneficiaries’ entitlements against later care costs or remarriage of a surviving partner.

Agreed.  There is generally no IHT benefit in owning as Tenants in Common.

There is when the owners are not married as there are no transferable nil rate bands.

benny5

getmore4less said:

doodling said:

Hi,

benny5 said:

doodling said:

Hi,

To be clear.  If the house is owned as tenants in common and the house is bequeathed to someone other than the other tenant then:

• If the will grants the second tenant the right to reside in the house for the rest of their lives (effectively a trust) then that beneficiary doesn't get the benefit of ownership until the second Tenant has passed and for most purposes they don't own it.
• If there is no provision in the will for the second tenant to reside in the house then both owners have equal rights and either of them can force a sale (or have their creditors force a sale), have the house taken into account in divorce proceedings, etc.

It would be unusual for a spouse not to give their partner a life interest in their will if the house is held as Tenants in Common.  There are various additional things that can be done in the will to allow for the remaining Tenant to move, downsize, etc. 

Given that the main asset is a property and not likely to be subject to the IHT then the only advantage of the TiC may be to protect beneficiaries’ entitlements against later care costs or remarriage of a surviving partner.

Agreed.  There is generally no IHT benefit in owning as Tenants in Common.

There is when the owners are not married as there are no transferable nil rate bands.

Not applicable in this case. Leaving just care costs/remarriage issues.

getmore4less

Also applicable to second marriage/civil partners where there are predeceased transferable nil rate bands as there is a limit of 100% 

SevenOfNine

doodling said:

Hi,

To be clear.  If the house is owned as tenants in common and the house is bequeathed to someone other than the other tenant then:

• If the will grants the second tenant the right to reside in the house for the rest of their lives (effectively a trust) then that beneficiary doesn't get the benefit of ownership until the second Tenant has passed and for most purposes they don't own it.
• If there is no provision in the will for the second tenant to reside in the house then both owners have equal rights and either of them can force a sale (or have their creditors force a sale), have the house taken into account in divorce proceedings, etc.

It would be unusual for a spouse not to give their partner a life interest in their will if the house is held as Tenants in Common.  There are various additional things that can be done in the will to allow for the remaining Tenant to move, downsize, etc. 

We're the "unusual" TiC owners!  If one dies the other gets everything, if that is subsequently 'lost' to care home fees, so be it.  If the survivor remarries it's up to them to protect our family, if they don't, so be it.  We have already provided hugely for our grandsons & our son inherited £273k followed a year later by a further £40k & has a salary of £65k..........he can look after himself.

benny5

SevenOfNine said:

doodling said:

Hi,

To be clear.  If the house is owned as tenants in common and the house is bequeathed to someone other than the other tenant then:

• If the will grants the second tenant the right to reside in the house for the rest of their lives (effectively a trust) then that beneficiary doesn't get the benefit of ownership until the second Tenant has passed and for most purposes they don't own it.
• If there is no provision in the will for the second tenant to reside in the house then both owners have equal rights and either of them can force a sale (or have their creditors force a sale), have the house taken into account in divorce proceedings, etc.

It would be unusual for a spouse not to give their partner a life interest in their will if the house is held as Tenants in Common.  There are various additional things that can be done in the will to allow for the remaining Tenant to move, downsize, etc. 

We're the "unusual" TiC owners!  If one dies the other gets everything, if that is subsequently 'lost' to care home fees, so be it.  If the survivor remarries it's up to them to protect our family, if they don't, so be it.  We have already provided hugely for our grandsons & our son inherited £273k followed a year later by a further £40k & has a salary of £65k..........he can look after himself.

This is very much the route I’m likely to follow.