Severing the joint tenancy over your property
In most cases, couples making a will tend to own a property in joint names. There are two ways in which you can own a property this way.
The options you are given when purchasing a property are to hold your property as:
1. Joint Tenants
2. Tenants in Common
What is a Joint Tenancy?
When a couple buy a property together, they usually do so on the basis that if one of them dies during the period of their ownership of the property, the share of the deceased person automatically passes to the survivor. In that example, the share of the deceased person does not form part of the deceased person’s estate but passes automatically on the death of the deceased to the surviving party.
Under a joint tenancy, owners do not have defined shares. They both own all of the property. At the time of purchasing a property, most couples opt to hold their property as joint tenants.
What are Tenants in Common?
Owners who hold as tenants in common can have either equal shares or unequal shares. For example, where one party has provided two-thirds of the purchase price and the other party one-third of the purchase price, those individuals might want to own the property as tenants in common on the basis of a two-thirds share to one and a one-third share to the other.
If you hold a property as tenants in common, each party has their own defined share, which they can then leave in their will to their chosen beneficiaries. It can therefore be beneficial for couples to hold their property as tenants in common if they wish to leave their interest in the property to different people. For example, they each have different children from previous relationships, and they want to ensure that their share of the property passes to their respective children.
Severing the Joint Tenancy
You can sever the joint tenancy over your property by each party signing a written notice and then updating the ownership position with the Land Registry.
One of the primary reasons why people sever the joint tenancy over their property is to ensure that their defined 50% share of the property passes to their children, rather than it automatically passing to a surviving spouse / partner and then subsequently the whole value of the property coming into consideration for the costs of care of the surviving partner / spouse.
If the property was held as tenants in common and one of the owners died, the deceased person’s half share of the property would no longer pass automatically to the other owner, but instead would pass in accordance with the deceased person’s Will.
Here are some scenarios to consider:
Example if joint tenants
Alan and Barbara own their property as joint tenants. Alan dies and the property automatically passes to Barbara by survivorship.
Barbara then requires care the year after Alan’s death. Because Barbara owns the property outright, there may be a need for Barbara to sell the property to fund her care. The full value of the property will need to come into consideration when calculating Barbara’s costs of care.
Example if tenants in common
Chris and Debbie own their property as joint tenants. They visit a solicitor to make their wills. At the time of the appointment, they explain that they want to leave their property to their children. They want to protect their estate against costs of care because Chris’ mother Barbara had to sell her home to pay for her care. Chris and Debbie decide to sever the joint tenancy over their property and become tenants in common in equal shares.
Chris and Debbie each decide to leave their 50% share in the property to their children, with a life interest provision for each other. The life interest for each other, protects the surviving partner following first death and would prevent a situation where the children can force a sale of the property.
Debbie dies in 2022. Chris then requires care in 2023. Because Debbie has left her 50% share of the property in trust for the children in her Will, her 50% share is safeguarded for the children and wouldn’t need to come into consideration for Chris’ costs of care.
As you can see from these examples, it can be advantageous to sever the joint tenancy over your property to protect some of your estate against future costs of care.
However, not paying for care isn’t always the best option and each situation should be discussed with a specialist as local authority rules differ.
If you are interested in severing the joint tenancy over your property and making wills to leave your interest in the property to your chosen beneficiaries, please contact an SFE lawyer. You can find one near you here