Joint Tenants or Tenants-in-Common

Published 05th Sep 2007

Our flat is held in mine and my partner’s names as joint tenants. Is this for the best?

When you buy a property with another person, you have a choice of ways in which to own it. The usual way is as joint tenants. With joint tenancy, you own the entire property jointly. If one co-owner dies, the property automatically passes to the other – you cannot leave it by will to a third party.

What about tenants-in-common?
With tenants-in-common, each person owns a specified share of the property. If one dies, their share passes via their will or, if there is no will, according to the laws of intestacy. It is therefore important that tenants-in-common have valid and up-to-date wills.

Tenants-in-common sounds more useful.
Yes, it is more flexible than holding it as joint tenants. It can be useful where, for example, one of the co-owners has children from a previous relationship and wants to leave their share ultimately to them rather than to the surviving partner – the partner can be protected by a trust giving them a life interest in the property.

Are there any other inheritance implications?
Severing a joint tenancy and becoming tenant-in-common is also a jumping-off point for much Inheritance Tax (IHT) planning. As a share of the family home can be willed away from the spouse (or civil partner) and left to adult children, it may enable both co-owners to use their nil-rate bands fully. There are also various “debt or charge” schemes where the deceased’s share of the property is left to a trust but the surviving partner retains the assets by signing an IOU in favour of the trustees. This is an area that HM Revenue & Customs are wary of, however, so you must make sure that any IHT planning is done by an expert.

So is it difficult to switch?
No, the procedure of severing a joint tenancy during life is straightforward and can easily be arranged by a solicitor. A joint tenancy can even be severed within two years of death by a deed of variation, but this is a more complex matter and various conditions must be fulfilled.
• Maggie Fleming is a director of Isis Financial Planners and a member of the Chartered Institute of Taxation.

Source: ' Telegraph '

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