Joint Tenants to Tenants in Common & Will Trust

Goldman2020

A married couple are considering changing over the way in which they own their property from Joint Tenants to Tenants in Common.

What would be the benefits if any to change the property ownership over from Joint Tenants to Tenants in Common and to set up a Will Trust to provide a life interest in the property until such time as the surviving partner / spouse either permanently leaves the property, re-marries, co-habits or dies?

Would changing from Joint Tenants to Tenants in Common mitigate Inheritance tax (IHT) in any way and if so and in simple terms how?

doodling

Hi,

What do you mean by "mitigate inheritance" - are you're referring to inheritance tax? If you are referring to inheritance tax then the short answer is that it doesn't make much difference in the case of a married couple.

The benefit of changing to tenants in common and doing a IPDI trust is that it ensures that the assets are treated separately for things like care fees so that costs for one of the couple can't eat up the whole of the value of the house.

There can also be benefits in making sure that your share of the value of the house goes to where you expect it to, for example, making sure that it goes to children rather than ending up with a second spouse in the event that the surviving partner remarries.

shiraz99

It has little affect on inheritance and IHT, what it's designed to do is protect some of the inheritance should the surviving partner end up in care. Not sure if this sort of thing is still needed these days.

Goldman2020

shiraz99 said:

It has little affect on inheritance and IHT, what it's designed to do is protect some of the inheritance should the surviving partner end up in care. Not sure if this sort of thing is still needed these days.

Why isn't it needed these days ?

RAS

As doodling said:

It makes little or no difference to the inheritance tax situation.

If you have children who you wish to inherit it can make a huge difference.

1. We see many families on here where the widowed parent remarries; doesn't make a will and their new spouse inherits everything from the first marriage. As the second marriage renders the survivors will invalid. Or their estranged nieces and nephews inherit long-term.

2. If the surviving parent needs a care home, the current costs can be £60k per annum. That will eat into any savings and equity. Tenancy in common ensures that the inheritors get half the value of the house, if nothing else.

Keep_pedalling

Goldman2020 said:

shiraz99 said:

It has little affect on inheritance and IHT, what it's designed to do is protect some of the inheritance should the surviving partner end up in care. Not sure if this sort of thing is still needed these days.

Why isn't it needed these days ?

t is only need for that purpose if you consider an inheritance more important than your well being and for people with high value houses it is not likely to make much difference. 

There are other reasons you might want to do this couples on their second marriages with children from the previous marriages would have a very strong reason to do this. It also protects inheritances in the case of a survivor remarrying.

Goldman2020

RAS said:

As doodling said:

It makes little or no difference to the inheritance tax situation.

If you have children who you wish to inherit it can make a huge difference.

1. We see many families on here where the widowed parent remarries; doesn't make a will and their new spouse inherits everything from the first marriage. As the second marriage renders the survivors will invalid. Or their estranged nieces and nephews inherit long-term.

2. If the surviving parent needs a care home, the current costs can be £60k per annum. That will eat into any savings and equity. Tenancy in common ensures that the inheritors get half the value of the house, if nothing else.

Briefly, how would a will and property protection trust be written and what would it include to prevent 1/ and 2/ above from happening?

RAS

OK, you are talking about a property protection trust. Where did you get that title from; a company selling services?

What we are talking about is a life interest trust. This is not written but the terms of the trust are included in the will.

Say the couple share a property 50/50? They both leave their portion of the property to their children, in trust, with the surviving spouse being left the right to occupy and usually the executors become trustees.

Decisions need to be made whether the trust ends on the survivor's death, if they remarry and how they they might use the equity if they need to down-size, or sell to move into care. 

We still see a number of instances when a step-parent who has been left a life interest trust (less often a parent), tries to circumvent the trust. But it is a lot harder if the trustees are named in the will. And it's sensible to ensure they are younger than the donors. 

You really need to talk together, think about it and see a good STEP lawyer who can talk you through the consequences and pitfalls of any ideas you have.

getmore4less

With an IPDI trust a remainderman as a trustee and legal owner can be a very good idea.

It is quite easy to obtain property when the relevant people don't know the beneficial interests.

Keep_pedalling

Goldman2020 said:

RAS said:

As doodling said:

It makes little or no difference to the inheritance tax situation.

If you have children who you wish to inherit it can make a huge difference.

1. We see many families on here where the widowed parent remarries; doesn't make a will and their new spouse inherits everything from the first marriage. As the second marriage renders the survivors will invalid. Or their estranged nieces and nephews inherit long-term.

2. If the surviving parent needs a care home, the current costs can be £60k per annum. That will eat into any savings and equity. Tenancy in common ensures that the inheritors get half the value of the house, if nothing else.

Briefly, how would a will and property protection trust be written and what would it include to prevent 1/ and 2/ above from happening?

A solicitor would draw up a suitable will for this, this is not something you should attempt to DIY.

Goldman2020

Thank you all for your responses which I do appreciate.