Yes that’s right, there are 2 ways in which couples can jointly own their homes. Now the way that 99% of couples own their homes is something called joint tenants. The reason 99% of people own their home in this way is because this is the default position conveyancing solicitors appoint people when they set things up. They very rarely ask any questions or give any advice. They just tick the box. There could be huge consequences to this simple box ticking act. Let me explain.
Joint tenants means that you own the property 100% each. Very similar to a joint bank account. Let’s say you have a joint bank account with your spouse and it has £1000 in. You don’t own £500 each. You both own all of it. You can both go into the account and legally withdraw the full amount. It may cause a problem / augment but it’s not theft.
So this might seem all when and good as you share an account with the person you trust most in the world, your spouse. In many cases it is completely fine but in some cases it’s not. Not when you look at how much your home is worth and damage that can be done when life events take a wrong turn.
The problem with joint tenancy in relation to home ownership is something called ‘rights of Survivorship’. What this means is that on first death the survivor inherits the whole of the property. It doesn’t matter if the deceased had a Will or not or what the Will said, the survivor inherits the whole of the property.
All we need to do is send the death certificate into land Registry and they take their name off as a joint owner and leave the survivors name on as sole owner. Nothing wrong with this I can hear you say?
What if the survivor went on to remarry? Well, the day the survivor remarries is the day their Will is revoked and the day that this property becomes a ‘Matrimonial Asset’. It belongs to the marriage. It would be part of any divorce settlement but worse still if the survivor dies first the new spouse inherits the property and when they die their children get the house and the children of the original two owners end up with a big fat ZERO.
“That’s not going to happen to us” Well it might. There are more people getting married in the over 60’s than in the under 30’s. What happened in that sad story to the original owners’ children is called ‘Sideways Disinheritance’ and happens every single day.
Now worse still is if, after first death, the survivor ends up becoming ill in later life and needs to go into care then because they automatically inherited the house then the whole of the property is available to pay for this care. With care fees being around £4,000 a month and the average length of a stay being 4 years, this can have a devastating effect on the amount left to pass down to children.
So, who would have thought that ticking a box so nonchalantly could have such devastating consequences further down the line
There is another way in which you can own your home jointly. It’s called ‘Tenants in Common’. You still own the house jointly but instead of it being 100% each it is 50% each.
There are still problems attached to owning the property 50% each , the main one being the Type of Will you have or not having a Will at all.
If you do not have a Will and you own your home as ‘Tenants in Common’ The following will happen on first death.
The deceased’s estate will go through probate and ‘Letters of Administration’ will need to be produced. This is where the dusty old ‘Rules of Intestacy’ come out and are applied to the deceased person’s estate. The rules are a flow chart and dictate who gets what from the person’s estate. In simple terms, on first death the first question asked is ‘Was the deceased married’ In this case the answer is yes so the half share of the house will pass to the surviving spouse. A much longer and drawn out way but with the exact same outcome as owning it as Joint Tenants and the same things could then happen in the life of the surviving spouse.
Funnily enough the same thing happens with Mirror Wills, the most common type of Will in this country. The deceased Will says ‘Everything to my spouse’ so the half share is passed to the survivor and ground hog day ensues.
It’s no good severing the tenancy and becoming ‘Tenants in Common’ but not having the correct Will in place. Most people that have severed the tenancy have also got a clever Will to go with it. This Will makes sure that the deceased’s half of the property doesn’t go to the surviving spouse but actually protects it for the rest of the surviving spouse’s life. He/She can live in it as if it were theirs until they die but if they remarry or if they go into care the half share is ring fenced and protected from this situation and will go to the ‘Ultimate Beneficiaries’, usually the children, on second death.
Now, we usually recommend this type of planning for couples who are just embarking on married / family life. In these cases there is usually a mortgage in place with a life assurance / insurance. This means that on first death the mortgage is paid off and because the death, in this case, is more than likely going to be premature, the surviving spouse will still be relatively young. The chances of the surviving spouse remarrying are a lot greater so having this type of planning in place if you are a married homeowner with children is, in my humble opinion, essential. After all, we do not know what life has in store for us and this type of planning can offer younger people a little peace of mind.
If you are a joint homeowner but are mortgage free then there is a fantastic way in which, after severing your tenancy and making you Tenants in Common, we can protect the whole of your property now instead of waiting for one of you to die to protect half.
If you would like to find out more about this method which has been designed especially for married retired home owners and the many benefits if offers, I suggest you follow the link to our website, watch some of our videos and take the quiz
