Joint Tenants to Tenants in Common - still the done thing?

FirstCoffee

There are a few posts on here about older parents switching their property from Joint Tenants to Tenants in Common to ensure that at least half the value is protected from (potential) care home fees and can instead be left to offspring. 

How common is this practice? Do most older homeowners with children eventually make this switch? 

It's not something I've come across before. The threads I'm reading about it on are relatively old, so is it still relevant for 2022, or has this been clamped down on in some way since?

Mojisola

FirstCoffee said:

There are a few posts on here about older parents switching their property from Joint Tenants to Tenants in Common to ensure that at least half the value is protected from (potential) care home fees and can instead be left to offspring. 

It only works if they also write wills leaving their share of the property to offspring (or anyone else) - usually giving the right to the surviving spouse to remain in house/sell up and move using the capital.

p00hsticks

Mojisola said:

FirstCoffee said:

There are a few posts on here about older parents switching their property from Joint Tenants to Tenants in Common to ensure that at least half the value is protected from (potential) care home fees and can instead be left to offspring. 

It only works if they also write wills leaving their share of the property to offspring (or anyone else) - usually giving the right to the surviving spouse to remain in house/sell up and move using the capital.

I'm not aware of all the intricacies of the difference between 'legal' and 'beneficial' ownership, but there there are also potential downsides in terms of possible loss of Inheritance tax allowances if the estate is not left to the spouse, and potential CGT liabilities for the offspring if they are not also residing in the property - it's by no means cut and dried as being beneficial overall, especially if the surviving spouse doesn't end up needing to go into care (which is still true for the majority of the elderly) or have other assets which mean they end up self-funding their care anyhow.

Keep_pedalling

I guess we fall under the older parents category, but we have not done this for several reasons. The main one is that we both want to be able to have the option to self fund any care we may need. The value of our house is also sufficiently high that it is highly unlikely that care costs for one of us would not use up more than 1/2 the equity.

I should also add splitting the tenancy does not guarantee protecting 1/2 the house, as although unlikely both could end up in care at the same time.

A more important reason for doing this is protecting the inheritance of children of parents who are on their 2 nd marri

SevenOfNine

We switched ours many years ago when we had discretionary trusts.  Its still Tenants in Common even though we changed our Wills to leave our share to each other. 

FirstCoffee

there are also potential downsides in terms of possible loss of Inheritance tax allowances if the estate is not left to the spouse, and potential CGT liabilities for the offspring if they are not also residing in the property - it's by no means cut and dried as being beneficial overall, especially if the surviving spouse doesn't end up needing to go into care (which is still true for the majority of the elderly) or have other assets which mean they end up self-funding their care anyhow.

Interesting that there are those downsides to weigh up as well. Good point.

gettingtheresometime

I recently met up with someone who had been widowed shortly after me & she (quite nosey I thought) asked if I'd put the house in mine & my sons name as she'd put her house into her name along with her daughters.

I wasn't going to get into an argument with her but my immediate thought was that if one of the children got divorced or died, then there could be problems especially if the surviving spouse got awkward.

getmore4less

p00hsticks said:

Mojisola said:

FirstCoffee said:

There are a few posts on here about older parents switching their property from Joint Tenants to Tenants in Common to ensure that at least half the value is protected from (potential) care home fees and can instead be left to offspring. 

It only works if they also write wills leaving their share of the property to offspring (or anyone else) - usually giving the right to the surviving spouse to remain in house/sell up and move using the capital.

I'm not aware of all the intricacies of the difference between 'legal' and 'beneficial' ownership, but there there are also potential downsides in terms of possible loss of Inheritance tax allowances if the estate is not left to the spouse, and potential CGT liabilities for the offspring if they are not also residing in the property - it's by no means cut and dried as being beneficial overall, especially if the surviving spouse doesn't end up needing to go into care (which is still true for the majority of the elderly) or have other assets which mean they end up self-funding their care anyhow.

That's where the IPDI trust comes in giving the spouse a life interest.

For the main tax purposes it is as if the spouse inherits but the assets are ring fenced.

lr1277

getmore4less said:

p00hsticks said:

Mojisola said:

FirstCoffee said:

There are a few posts on here about older parents switching their property from Joint Tenants to Tenants in Common to ensure that at least half the value is protected from (potential) care home fees and can instead be left to offspring. 

It only works if they also write wills leaving their share of the property to offspring (or anyone else) - usually giving the right to the surviving spouse to remain in house/sell up and move using the capital.

I'm not aware of all the intricacies of the difference between 'legal' and 'beneficial' ownership, but there there are also potential downsides in terms of possible loss of Inheritance tax allowances if the estate is not left to the spouse, and potential CGT liabilities for the offspring if they are not also residing in the property - it's by no means cut and dried as being beneficial overall, especially if the surviving spouse doesn't end up needing to go into care (which is still true for the majority of the elderly) or have other assets which mean they end up self-funding their care anyhow.

That's where the IPDI trust comes in giving the spouse a life interest.

For the main tax purposes it is as if the spouse inherits but the assets are ring fenced.

Does this setup allow the remaining spouse to move or downsize as required? Or does the ability to sell but still maintain a life interest have to be written up in a special way?

mrschaucer

lr1277 said:

Does this setup allow the remaining spouse to move or downsize as required? Or does the ability to sell but still maintain a life interest have to be written up in a special way?

That's where your solicitor comes in.  Just say what provisions you want included in the trust when your will is being written and it can all be done.

SeniorSam

There is another advantage in holding your home as Tenants in Common for the protection of half the value of the home.

Mirror Wills are made so that on first death a gift of up to the nil rate band is to be placed in Trust for the children, with the residue to the spouse, which includes the half residence so the surviving spouse then owns 100%

 However, the surviving spouse can request that the gift be loaned to them rather than gifted into Trust, with a Promissory Note to repay the loan to the Trustees from their estate when they eventually die.

In this way, the residence has been passed to the spouse and they have full control of all the assets, but the Loan that has been registered against the property is protecting the half value of the home for the children.

Sufficient wording of the Will is essential in order to ensure that the Trustees have authority to do this and can accept the change in the Will.

We have such Wills ourselves made over 25 years ago and have recently had them checked by a solicitor for minor changes in a Codicil.