16/05/2024
We have discussed in the past 'sideways disinheritance' and how we can help to ring fence a portion of your main residence for your children. Severing the tenancy of your property is key to the trust we set up to achieve this doing it's job as intended. This article is intended to aid your understanding of how it works and what is involved.
If you would like more information or wish to discuss protecting your assets for your children, please get in touch.
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How do you own your property? And why does it matter when you die?
When you buy a home, often you are buying it with someone, and you become co-owners. There are two different ways to actually “own” the property; firstly, would be Joint Tenants, secondly would be Tenants in Common.
Despite the word “tenant” being associated with landlords, in legal language this means you are an owner of the property.
What exactly is the difference between these two?
Joint Tenants (JT):
Both you and your partner (or co-owner) own 100% simultaneously. This isn’t to say that there is 200% of the property, but that both parties are treated as having total ownership of the property. If one of owners were to unfortunately die, then by the rules of Survivorship the survivor would be the sole owner.
If the first to die wanted to give their “half of the property” to someone other than the co-owner, they would not be able to as the rule of survivorship takes place before the Will.
Tenants in Common (TiC):
With this way, you and the co-owner will more often than not have a 50/50 split of the property, though it is much more flexible as it allows for people to own the property in unequal shares if they wished to. This can also be beneficial for tax purposes such as utilising Residential Nil Rate Bands with unmarried couples that have kids, or protecting your share of the house when you die.
Most trusts will make use of the property being held as TiC and helps you and the co-owner manage the property more fairly if you have different desires for where you would like your half to go.
What if I want to change from one to the other?
Thankfully, there are ways in which this can be done that will allow you to free up your share of the house so that you have control over it; the most common transition would be from going from Joint Tenants to Tenants in Common. This would likely be done for the reasons mentioned in the previous section; often allowing for a more strategic control over your assets, particularly on death.
So how is this done?
Going from JT to TiC is done by carrying out a qualifying act of severance. This can be a formal Severance Notice either between the owners (mutual agreement), via mutual conduct or can be done unilaterally (by one party).
If you ever have any concern or worry about completing this correctly, speaking to a professional such as a Will Writer that is a member of the Society of Will Writers will help you make sure you and your co-owner hold the property in ways that are most suitable for you.
A Brief Overview
So, often it is married couples/civil partners that own a property as joint tenants, and this is often beneficial if you want your significant other/ the other co-owner to keep 100% of the house if you were to die before them.
Sometimes however, Tenants in Common is a wiser option for holding your property. If you would like to know how this could help you for Inheritance Tax or for ensuring protection for your share of the house, having a Will Written will help get you the advice you need to maximise your benefit
