The majority of you will be aware of the difference in these terms in relation to property ownership, but for those of you who are not, a quick reminder.
Joint Tenancy is where you each own the whole property, which means that when one of you dies their half of the house automatically passes to the spouse – that is the law, no arguing. Tenants in Common is where you each own an identifiable percentage of the property (it could be a 50/50 split or an unequal portion), which means that when one of you dies, the deceased’s share of the property will pass according to the deceased’s Will.
If we have set up Discretionary Settlements for you (which we have done for the majority of you), we will have changed your property title to be held as Tenants in Common. Therefore, on first death, half of the property is available to be passed into your Settlement for future protection – be that from future remarriage, care-home fees or potential inheritance tax savings.
If you move house, the default for your solicitor will normally be to select the ownership of the property as Joint Tenancy. It is vital that you ensure any new property is held as Tenants in Common if you have Discretionary Settlements, as otherwise this important Estate Planning cannot be used to its full advantage. The entire property will pass to the surviving spouse and half of the property will not be available to be used in your trust arrangements. In most circumstances this could be rectifiable; however, not purchasing any new property as Tenants in Common would result in additional legal fees of up to £1,500 or more which can easily be avoided.
If you have any questions on this or want to learn more about Discretionary Settlements, how they work and what the advantages are, then please get in touch. ν