Joint Tenants or Tenants in commin

mickeycards

Hi guys, newbie here but long time viewer.  About to purchase new property and need to decide between Joint Tenants or in-common - solicitors letter briefly gave info re could be beneficial to protect half of house from future potential care home fees but I was wondering about how it effects IHT? 

Brief background, house will be purchased outright £600,00 and will have £950,000 left.  benefits for tenants in common means half house can be left to our children, protecting half of it if the other remarries or goes into full time care?  Is it also better to reduce IHT? 

Albermarle

If you are so financially comfortable, why would you want to avoid paying for good quality care later in life ( if either of you ever need it anyway)  ?

mickeycards

Not wanting to avoid it, like you say should be plenty to cover care but would like to guarantee something left to children 

housebuyer143

mickeycards said:

Not wanting to avoid it, like you say should be plenty to cover care but would like to guarantee something left to children 

I would do tenants in common but I probably wouldn't leave your halves to your children in a will until your older. 
My mum and dad did this and my dad died unexpectedly in his 60s and left half the house to his children. My mum found out that she would be beholden to her children to move to sell etc and what if you fall out?  
My mum decided that she would prefer the whole house so she was free to do as she wished and so she could self fund a nice care home if she needed to. 

badmemory

If they are not home owners already then owning part of another property will stop them from being first time buyers.  Give them equal amounts towards paying off their mortgages now.  This really depends on how old everybody is now.  The possibility of future divorces or even going bankrupt.  Even if half the house is owned by the offspring it is possible that when the second spouse dies & they have remarried that they will leave the property to the children but giving the new partner rights to live there for life.

housebuyer143

badmemory said:

If they are not home owners already then owning part of another property will stop them from being first time buyers.  Give them equal amounts towards paying off their mortgages now.  This really depends on how old everybody is now.  The possibility of future divorces or even going bankrupt.  Even if half the house is owned by the offspring it is possible that when the second spouse dies & they have remarried that they will leave the property to the children but giving the new partner rights to live there for life.

Definitely don't leave it to them directly. If you need to then make sure a trust is set up on death. You will really cause your children issues if they are owners of the house. They will lose FTB status and be liable for extra stamp duty, be liable for CGT and be ineligible for most benefits if they fall on hard times. This isn't the case in a trust. 

mickeycards

Thanks, we are early 60’s and retired,  kids both home owners and we have already helped with deposits.  Fingers crossed we don’t need care, so are there advantages for tenants in common re inheritance tax as it stands today - know limitations could change going forward 

downshifted

mickeycards said:

Thanks, we are early 60’s and retired,  kids both home owners and we have already helped with deposits.  Fingers crossed we don’t need care, so are there advantages for tenants in common re inheritance tax as it stands today - know limitations could change going forward 

Excellent question, we’re in a similar position, about to move and need to decide which way to go too. Hope someone can help

Keep_pedalling

If your house was worth £200k and you had little more in the way of savings this might make sense but you have ample savings to cover self funding residential care (or even better, live in careers) so you are never going to be in the unfortunate position of having to rely on a cash strapped LA to provide care.

There is a better reason for TIC however and that is to protect your children’s inheritance if the surviving spouse remarries and fails to make a new will or make one in favour of the new spouse instead. If you do this you both need to make new wills setting up an immediate post death interest trust. This gives your spouse a life interest in your home with your children inheriting on the second spouses’death. Best to use a STEP qualified solicitor to do this. 

p00hsticks

I'm not an expert but I don't believe there are any IHT benefits and there may be negatives; the half share of the house is very close to the current IHT allowance. AS I understand it (others please correct me if I am wrong); anything left to a spouse is an excepted estate with no IHT to pay, but there could be inheritance tax to pay on the first death if more than the IHT allowance is left elsewhere. 

However, the combination of owning a house as tenants in common and having a will gives you options you don't have if the house is held as joint tenants, as ownership of the property will be determined by the will. 

Keep_pedalling

p00hsticks said:

I'm not an expert but I don't believe there are any IHT benefits and there may be negatives; the half share of the house is very close to the current IHT allowance. AS I understand it (others please correct me if I am wrong); anything left to a spouse is an excepted estate with no IHT to pay, but there could be inheritance tax to pay on the first death if more than the IHT allowance is left elsewhere. 

However, the combination of owning a house as tenants in common and having a will gives you options you don't have if the house is held as joint tenants, as ownership of the property will be determined by the will. 

There are no negatives as far as IHT is concerned with a will that gives a spouse a life interest via an immediate post death interest trust. The bequest is still covered by spousal exemption. It is beneficial as far as CGT is concerned, and if the ultimate beneficiaries (remaindermen) do not already own their own home it avoids them having to pay additional tax on their first homes. 

As the OP is deep in IHT territory they might like to think about gifting some of the £950k in savings now.