Do you own a property with a friend or partner? There’s more than one way to split ownership, and the option you’ve chosen will have a big impact on your will. So, let’s take a look at joint tenants vs. tenants in common – and death.

 

Joint tenants vs. tenants in common

First things first: what’s the difference between owning a property as joint tenants and owning it as tenants in common?

If you are joint tenants, you both have equal rights to the whole of the property. This means you and the other owner must act together: you share a joint mortgage, and if you want to sell, you have to both agree. It’s a popular option for partners and spouses.

If you are tenants in common, you each own a separate share in the property. E.g. you might own 60% while your friend owns 40%. You still both have to agree if you want to sell, but you can (in theory) get separate mortgages, although most providers are wary of this. This is the preferred option for friends and relatives.

Alright, so that’s the basics. But what happens with joint tenants or tenants in common if one dies? Who inherits? Can you leave your property in a will?

 

Joint tenants and death explained

If one joint tenant dies, the other owner will automatically own the whole property by themselves. This is because both have equal rights to 100% of the property. So:

  • You can’t leave property owned as joint tenants to someone in your will 
  • Instead, the property will pass straight to the other owner 

If the other owner dies before you, you will own the property solely – only then can you leave it to someone in a will.

NB: In Scotland, joint tenants are called ‘joint tenants with right of survivorship’. 

 

Tenants in common and death explained

So, what happens when one of the tenants in common dies? In cases like this, the property won’t pass automatically to the other owner or owners. That’s because owned by each person separately. So:

  • As tenants in common, you can leave your share of the property in a will
  • If you don’t make a will, your share will be dealt with according to the laws of intestacy
  • The other owner will not inherit your share of the property automatically; if you want them to have it when you die, make a will saying so!

 

Make a will today!

For most of us, a property is the most valuable thing we’ll ever own. A will is the only way for you and your co-owner to make sure your home will go to the right people if something were to happen to you.

Here on Beyond, you can make a legally binding will in just 15 minutes. It costs just £90 for a single will and £135 for couples. Find out more here!

 

Joint tenants or tenants in common and inheritance tax

Inheritance tax (IHT) is due on estates worth more than the allowance of £325,000. A tax of 40% is taken on the portion of the estate that’s above that threshold. 

If you leave your main home to a direct descendant (child, grandchild, etc.) you get an extra ‘main residence’ allowance of £150,000. This means you can pass on a property worth up to £475,000 without paying any inheritance tax on it.

In addition to this:

  • Anything you leave to a spouse when you die cannot be taxed
  • If you don’t incur any inheritance tax when you die, your allowance passes to your spouse
  • In which case, they can potentially pass on up to £950,000 when they die (regular allowance + main residence allowance x 2)

 

What does this mean for the joint tenants vs. tenants in common debate?

Properties owned as joint tenants and tenants in common can both be subject to inheritance tax. In both cases, if your share of the property goes to your spouse or civil partner when you die, no tax is due on that transfer.

But if you’re not married to or in an official civil partnership with the person who inherits the property, differences arise:

  • Joint tenants: half of the value of the property will be added to the total value of your estate (assuming it’s owned by two people)
  • Tenants in common: the value of your share of the property (30% of the house’s value, say) will be added to the total value of your estate

If your estate then ends up being above the tax-free allowance, with all debts considered, then IHT will be due.

 

Being tenants in common can give you an advantage in some cases

As tenants in common without right of survivorship, you can use a will to decide who will inherit your share of the property when you die. 

For example, you might prefer to pass your share to your children, rather than a spouse. This means that if your partner remarries, your children will still own some of the house whatever happens, and can claim a portion of the revenue from the sale, if it is sold. They can also benefit from the extra ‘main residence’ tax allowance.

As tenants in common, you can also decide what portion of the property you own. Rather than owning half the property, you could own 25%, for example. So, you could use a tenants in common arrangement to make sure that your estate’s value comes in under the inheritance tax allowance.

 

Joint tenants or tenants in common? How to find out

First, check any paperwork you might have from when you purchased your home. It may also be mentioned on paperwork from any remortgaging you might have done.

If you can’t find the info there, do a Land Registry Property Search. So long as the property is registered, it should be easy to see how it is owned from the Title Registration. There is usually a small £3 fee for these docs.

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