Joint ownership, what happens when one half dies?

Imp

I'm going to be morbid and pessimistic here, but hear me out.

I am going to get married in a month's time. My wife to be is a joint owner of a flat along with her father. This was done so she could get a mortgage on the flat at a very high income multiple. Both her and her father's name are on both the deeds and on the mortgage.

Not being a home owner, I have substantial savings ready to put towards a deposit. When we are married I can improve our monthly cash flow by paying off around a third of the mortgage on the flat.

My concern is what happens if my wife dies. Everywhere where I read about joint ownership (not tenants in common) if one owner dies the ownership of the house transfers to the second owner.

On the other hand, as her husband I would be her next of kin, so would benefit from her estate.

So what would happen if she dies? Would the ownership of the flat transfer to her father and I would loose any money I had contributed to it (meaning I have to save up for another 10 years before buying my own home) or would the joint ownership be transfered to me?

This naturally assumes my future father in law has no sence of moral justice, but it has been my experiences of families that you should expect the worst and be pleasently surprised when anything else happens.

margaretclare

Joint ownership - both own 100% (it's like a joint bank account).

When one dies, the survivor becomes the sole owner, 100%.

HTH

Margaret

Richard_Webster

Is OP sure that his fiancee and her father aren't tenants in common?

If they aren't then the joint tenancy can be severed quite easily and converted into a tenancy in common.

aardvaak

margaretclare wrote: »

Joint ownership - both own 100% (it's like a joint bank account).

When one dies, the survivor becomes the sole owner, 100%.

HTH

Margaret

Margaret

I agree with your comments above if as you say both own 100%.
What happens as far as Inheritance Tax is concerned - is there no tax to pay on becoming sole owner?

Imp

Thank you for the reply Margaret

Yep, I'm sure they are joint owners and not tenants in common.

The inherritance tax was going to be my next question. I'd like to get rid of this mortgage, but don't want to potentially leave myself in difficulty. My future wife and I have talked about the inherritance tax, and would like to convert the ownership to tenants in common with the father in law owning 10%, but this could leave somebody with a tax bill - i.e. he is gifting us 40% of the property. I haven't found any guidance on this anywhere.

chappers

Has she been paying the mortgage on her own or has her father been sharing the costs and does he want his money back ? or any profit etc.
If he does why not pay him from your savings and then do a transfer of equity to yourself if he doesn't want any money then just do a straight forward transfer of equity and use your cash to reduce the mortgage or as a deposit for your next home.
Assuming you have the income to take on his share of the mortgage.

Then put anti-freeze in her curry

Nicki

When you sever the joint tenancy you can specify the shares which each side is to own. How much as FIL realistically contributed to the equity? If FIL has contributed very little, then he'll only own a small percentage of the equity, which will be taxed as part of his estate if he dies first. If your wife dies first, and leaves the property to you, this will be tax free as there is a full spousal exemption on IHT, but you may then want to buy your FIL's share out so you own the property outright. If FIL owns a larger share, he can give some to your wife now if he likes using his tax free allowance, and provided he survives another 7 years this will be free of all IHT. If he dies within 7 years there is tapering relief. You would need to check with the Tax Office what the current tax allowance is though.

aardvaak

Nicki wrote: »

When you sever the joint tenancy you can specify the shares which each side is to own. How much as FIL realistically contributed to the equity? If FIL has contributed very little, then he'll only own a small percentage of the equity, which will be taxed as part of his estate if he dies first. If your wife dies first, and leaves the property to you, this will be tax free as there is a full spousal exemption on IHT, but you may then want to buy your FIL's share out so you own the property outright. If FIL owns a larger share, he can give some to your wife now if he likes using his tax free allowance, and provided he survives another 7 years this will be free of all IHT. If he dies within 7 years there is tapering relief. You would need to check with the Tax Office what the current tax allowance is though.

But as was said earlier at present they both own 100% will there be any Inheritance Tax liability on the part of the FIL.

chappers

Neither will be liable for inheritance tax if the other dies as they already own the property. In the prestent situation if your wife dies your FIL would get the property as joint owner.

Iam in a similar position with my bussines partner we jointly own a house and we had to draw up a specific partnership aggreemment which states what happens to his half when I poison him with anti-freeze. Otherwise the property would have passed over to me rather than his family.

Nicki

aardvaak wrote: »

But as was said earlier at present they both own 100% will there be any Inheritance Tax liability on the part of the FIL.

No. You have misunderstood either my post or Margaretclare's. They currently both own 100% because they are joint tenants. Therefore if one dies the other gets the lot with no IHT liability. However that isn't what OP wants now he is getting married. He wants to be able to inherit some of the property if his wife dies, as he will be contributing to the mortgage. Therefore assuming the wife agrees the tenancy needs to be severed now and the shares worked out.

As FIL may want to pass money on to his daughter without incurring IHT he may be inclined to be generous about the shares they agree at this stage. Whatever the shares decided upon, the tax situation will be as I described.

kunekune

Richard Webster is probably more up to date on this, but don't assume that you will automatically get your wife's share, or all of it anyway, should she die.

First of all, if it is her property and you are expecting to be the person who receives her property on an intestacy, your entitlement is less than that. There is a basic amount (£125K if you have children, £200K if you don't, I think) and then you get a SHARE of what is left. If there are children, they get some, if not, it goes to members of her family. This is why a will is advisable where there is a substantial amount of property that isn't held in joint tenancy.

The second issue, and I keep banging on about this in this forum (without thanks, I will point out, LOL) the legal title is not always the end of the matter. If her father is a joint tenant at law, he may have more rights than that in equity. Sometimes, especially if one person has contributed more than half of the initial price or has made more than half of the payments, they will claim - and are likely to be successful with this claim - that they have a 'beneficial' interest of more than half.

My advice would be to make sure, at minimum expense, that everyone's entitlements are clear right now. That has two elements (at least: please don't construe this as detailed legal advice). First, if there tenancy can't be severed, at least get it in writing what the 'real' shares are. Provided this isn't in dispute, it won't be difficult: it involves a declaration of trust. Second, your wife really ought to make a will. Hey, I know ... I don't have one, lots of people who should know better don't have one, but at least we don't have a house ... but it is one of your most important protections. For both of you. Just make sure that if it is done before the wedding that it is clear that it has been done 'in contemplation of marriage'. Otherwise it will become invalid, I think.