TENANTS IN COMMON versus JOINT TENNANTS

sloughflint

Debt_Free_Chick wrote: »

No difference as to what might happen. If a charge is to be placed on the debtor, then it can only be applied to the debtor's share of the property.

You certainly seem to know your stuff DFC.:T
Another thread ( the mother in care one) has got me curious on this. Would the above apply to care fees too?

The position of a JT or TIC is the same really, until death. Until then, you jointly own the property.

So if the person in care was to die first, any charges could only be applied to the half share of the house or even none of it because house becomes instantly owned by the other person if JT?

The only difference is what happens to the deceased's share on death. With a JT, it passes to the other party. With a TIC, it goes to the deceased's estate, to be dealt with according to the will.

So is it just a gamble as to who dies first? The person in care or the person living at home? If the person at home dies first then whole house can be considered for care fees but if person in care dies first then none of house can be considered by LA? Is TIC useful purely because of the gamble of not knowing who would die first?

TIC is often used as part of inheritance tax (IHT) planning, but the arguments for a married couple doing that are not so strong, with the changes coming in from April.

Are these the changes announced in October re doubling of NRB or something else that I might be unaware of?

Debt_Free_Chick

sloughflint wrote: »

You certainly seem to know your stuff DFC.:T
Another thread ( the mother in care one) has got me curious on this. Would the above apply to care fees too?

I have to admit, the position re care fees is something I have no experience with. There are others who might be better placed to answer these specific questions, but I'll give you my thoughts from the debt/property side of things.

Ideally, you want avoid unsecured debts becoming a charge on any property. But as a last resort, they can be. The creditor might agree, if you suggest it - or the creditor might force it via a CCJ. Of course, the other option is to take a mortgage on the debtor's share to pay the debt .... but generally, lender's want a joint mortgage on a jointly owned property.

So if the person in care was to die first, any charges could only be applied to the half share of the house or even none of it because house becomes instantly owned by the other person if JT?

hhmmmm....... that's quite interesting. I would say that the deceased's estate would become liable for the debt. But the charge almost certainly wouldn't be removed until the debt is paid, as the creditor has to remove it (or, at least, complete the LR form to remove it). This situation could become quite messy and I have to admit I'm not sure how this would work in practice.

So is it just a gamble as to who dies first? The person in care or the person living at home? If the person at home dies first then whole house can be considered for care fees but if person in care dies first then none of house can be considered by LA? Is TIC useful purely because of the gamble of not knowing who would die first?

If the house is owned as JT and the one in care is the survivor then, on death of the other party, the one in care suddenly has an increase in assets - as they now own the whole property. I don't know what the LA would do in this situation - would they reassess the financial position?

Are these the changes announced in October re doubling of NRB or something else that I might be unaware of?

Not sure which changes you're referring to - but the comparison, in general, of JT and TIC has always been the case. It's simply the way that the law treats the two different parts, as owned by each party.

Hopefully, someone else can be more specific about the payment/obligation for care fees.

takoo

Hi Webtalk

I may be wrong!

I had always understood that if the spouses are tenants in common and the deceased spouse leaves all their property to another by will (not the surviving spouse), the latter may challenge the will either:

• under the rules of intestacy or
• by seeking a variation of the will under a deed.

Its a long time since I heard of this point (assuming it was/is true) -so it may be different now.
Best wishes for the new year

Takoo

kunekune

The rules of intestacy aren't relevant in this situation, because there is a will: "intestate" means that someone has died without a valid will. What is relevant is the legislation explained in the following website:

http://www.divorce.co.uk/Portals/0/pdf/Inheritance_article.pdf

Basically, the wife can make a claim against the estate, but the order would be discretionary, and it would take a while and some money to sort out. Some countries have provision for this to be dealt with as a matrimonial property thing - eg, during hubby's life, if they had split, the wife would have had a claim against the assets, and this shouldn't be different on death. But my reading of what it said in the site I looked at seemed to be that this route was only possible where separation/divorce proceedings had already started.

I'm not a UK inheritance/family law expert, so someone else may know more.

Dumbledore55

Tenants in Common is often used when one partner has children from a previous relationship and wants the children to be guaranteed to get their inheritance. My friend's father died, leaving everything to her step-mum who had a grown up son from a previous relationship. She has since died and left everything to only her son - my friend has got nothing at all.

Dumbledore55

margaretclare wrote: »

What step-mum should have done was to name both your friend and her biological son in her will. It's necessary to do this in the case of step-families - they have to be specifically named. Just saying 'my son' or 'my grandchildren' isn't enough, because then it just goes to the biological children.

We've done this in our wills, 5 grandchildren between us, they've all been named.

Margaret

Thanks - I think she wanted it all to go to her son - who hasn't done a days work in his life! Long story but she knew what she was doing!

Debt_Free_Chick

Another important point brought about by the posts on this thread is the need for professional advice when you draw up will.

A template for £15 from the stationers is never going to deal with the situations that have arisen here :mad:

If you have thousands - or hundreds of thousands - that you want to leave to those you love, surely it's gotta be worth spendinig a few hundred quid on getting it right?

simpywimpy

My parents changed to tic to save on inheritance tax and any care charges and my mother has since died. The plan was that I would then take my mums half of the house, safeguarding dads from future care charges but it appears I then leave myself open to capital gains tax on the rise in value between mothers death and dads.

Also, because the deeds are TIC, we need to apply for probate. Had it been JT and the share going to dad, we wouldnt need it.

It really is a minefield. We have yet to decide what to do with mums half share but am told, I dont need to do anything unless dad dies and I then want to sell the house.

bunking_off

EdInvestor wrote: »

[/list]The local authority cannot "take the home" to pay for care while a partner/spouse is living in it. However if the home is owned as joint tenants, and then the spouse not in the care home died and the house was then 100% owned by the person in care, then the LA could take it to meet the costs.

With tenants in common ownership, the LA cannot take the home while the spouse is still alive and if either spouse died, leaving his/her half to their children (say) the LA still couldn't take the house as you can't sell half a house.So TIC is usually best if there is a possiblity of care being required.

This is an area that intrigues me, and one that I've been thinking of putting a posting up for a while.

I would imagine that in this day & age of higher life expectancy, the probability of having to go into some form of care is increasing all of the time. As others have said, the benefit of TIC for inheritance tax planning has now diminished because of the changes announced in the last budget - I do wonder whether it should be routine to go down the TIC approach to avoid state sponsored theft of houses, however.

If you take the case of a house worth, say, £200k (I'm in the north!), and care home fees up at the £2-3k/month level, it's quite plausible that offsprings' inheritance won't be frittered (!) away on around the world cruises, but instead go to fund care as we grow old. To put it another way, all this rampant house price growth ultimately ends up in government coffers but not via taxation.

Like you say, while both parties are alive there's little difference in JT or TIC...the LA can't force sale of the house while only one partner is in care, and if both go into care seemingly little can prevent the sale of the property.

However, would I be right in thinking there's a logic in going down the TIC approach, and both parties willing their share of the house to their offspring on their death? That would mean that if e.g. wife goes into care then husband living at home subsquently dies, sons/daughters own half of house & wife the other half, meaning the LA can't sell it to fund care home provision.

To me, this seems a one-way bet given there doesn't appear to be a downside of TIC other than the - I guess small - transaction cost of converting from JT. If neither partner goes into care, nothing lost. The only downsides I can see are;

1) How good the relationship is between the surviving partner and their kids. Say they were still at home after their spouse had died, with their kids owning half of the property. Could the kids do anything to force them out, or force them to pay rent, if family relations broke down?

2) Capital Gains Tax implications. As the half of the property owned by the kids wouldn't be a principal primary residence, I'm guessing that when their surviving parent finally popped his/her clogs and the house is sold, they'd need to pay 18% of whatever price increase has occurred from death of the first parent? It's a trade-off, but 18% of any growth versus £20-30k per year that your surviving parent's in care seems a reasonable price to pay (and is there any way of avoiding this, e.g. by putting it into a pension portfolio?)

3) Tax avoidance - sort of. Is there any way that the LA could say such an approach was a blatant scheme to avoid sale of the house hence rule it invalid?

As a matter of interest, if the LA does force a sale, what happens to the proceeds? Do they directly take them, or does it go into some form of interest paying bank account which is drawn upon to pay for the carehome? Would imagine the interest on a house price sale would be material.

Interested in opinions. My in-laws are in their 70s and we've collectively been considering whether this is something we should look into.

bunking_off

Hi margaretclare,

..appreciate your points.

In our case, my wife's now the only beneficiary (sadly her brother died far too young), we can't have kids so don't have that complication, and her parents have few assets other than the house, so different situation. Indeed, in the reverse direction if they do find themselves unable to exist on their limited pensions I wouldn't have any issue borrowing on our own property to sub them, rather than leaving them to the equity release sharks (though I won't be funding any around the world trips!).

The "theft" term was deliberately emotive, but for me I believe there's an unsurfaced debate to be had about how much of the climb in property values will end up back in government coffers. Listening to Martin on Jeremy Vine an hour ago, he was berating how people are running up credit card bills then using their equity to pay them off (ie add it to the mortgage). That's certainly a bad thing, but one wonders whether it's totally bad, if the alternative is you have plenty of equity which is then plundered to pay for your carehome...that the government would have funded if you'd been less conservative with your finances. I'm being deliberately provocative, but it does seem that those of who are careful ultimately end up subsidising those who aren't...

I was interested in the figures about broadly the same proportion of people needing care...I guess I'd taken it as read that if we live longer, the chances of needing to go into a care or retirement home were that much higher. Like you said, that doesn't necessarily follow. I've been trying to find some statistics but failed. Best I've seen is from this site which says

Government statistics estimate that overall places in residential care homes and care homes with nursing and hospitals will have to increase from around 450,000 currently to approximately 1,130,000 in 2051, in order to cope with the demands of the growing ageing UK population

...not too informative about the short term.