When two or more people buy a property they will hold it as joint tenants or tenants in common.

What Are Joint Tenants?

The first of these, joint tenants, is when each owner owns the whole of the property. If one dies, the property is owned wholly by the survivors. This is most commonly used by married couples or those in a civil partnership.

What Are Tenants In Common?

Tenants in common is when each owner owns a share of the property. If one of the owners dies, their share will pass to the beneficiaries in their Will.

If two or more people buy a property as tenants in common they need to set out the shares in which they hold it. A Declaration of Trust is a often used and can be as simple or as complicated as the parties wish.

The Declaration will usually set out how much each party paid towards the property and the share of any income and equity will be divided. It can also set out what happens if one party invests further in to the property (for example by paying for an extension or conservatory). Each Declaration is written specifically for the parties.

Making A Will For Joint Tenants

It is crucial that everyone has a Will setting out what will happen to their share when they pass away. It is worth considering:

  • Whether you want to give the surviving owners an opportunity to buy your share;
  • If you want to leave your share to someone else, they may want the property to be sold to release the equity. This may not sit well with the remaining owners so you can create rights for the other owners to continue occupying the property or to take income from it (if it is being let). Usually a right to occupy will end after:
    • the end of a period of time (for instance 2 years or the other owner’s lifetimes)
    • on the occurrence of a certain event (this could be the surviving owner/s death, a marriage or civil partnership or anything else specified in the Will).

What IHT Is There On Joint Tenancy?

On death your estate may be subject to inheritance tax liability (‘IHT’). If your estate is over the IHT nil rate tax band (currently £325,000.00) and there is not enough money to pay, the property may have to be sold in order to pay the bill!

If you would like us to investigate how you hold your property or check your Will or inheritance tax position and provide you with advice, please do give us a call. We provide FREE Will reviews.

by Andy