Protecting your partner’s interest in preparation for when your gone is obviously a high priority and with expensive care fees becoming more and more of a drain on savings, many couples are now opting to change their properties ownership from Joint tenancy to tenants in common but how does this effect the distribution of your estate?
Joint tenancy is the most common way for partners to own a property. Joint tenants share equal ownership of the property and have the equal, undivided right to keep or dispose of the property. Joint Tenancy also creates a Right of Survivorship. The joint tenants all enjoy the same rights until one of them dies. Under the right of survivorship, the death of one joint tenant automatically transfers the remainder of the property to the survivor, and then they will own the entire estate. It is important to call the HM land registry to inform them of the change, this way they have a current record of the properties ownership. It also means one less thing for your executor to deal with once you have passed. Due to the Right of survivorship, a property owned as joint will not have to go through probate if there is a surviving owner.
Tenants in Common
A tenant in common is when two or more people own a percentage of a property and the percentage of the property is what is counted as part of your estate. This means the other owners interests in the property are not effect by another owner’s debts or liabilities. The most common reason we hear for this change in ownership is to protect a partner from care home fees. It means that the debtors cannot collect their fees from your spouse’s estate, only from yours and if your estate has been completely depleted by these fees the other owner’s interests in the property will be protected.
In these cases it is easy to see why someone would change the way they own a property. However you should consider how this change can affect the administration of your estate when you pass away. When a property is owned as tenants in common there is no survivorship clause, this means you can pass your percentage of the property to whomever you choose in your will. However whether you choose to leave it to your spouse or someone else in both cases the property will need probate in order to pass your share onto your chosen beneficiary. This is because your share of the property is a significant asset in your sole name.
If the rest of your estate is owned jointly, for example bank accounts in joint names, it can be easy to forget to change the property ownership to the sole surviving owner or you may just not see the need, but this is where it can cause problems later on. When the second owner passes away the property will essentially have to go through probate twice. Probate will first need to be obtained for the pre-deceased partner in order for it to be counted as part of the surviving spouse’s estate. Once this has been done, you will have to apply for probate again but now for the more recently deceased estate. This can mean the whole process will take longer but will also mean it will be more expensive. As you will be retrospectively applying for an estate that could be years old it might not be as simple as it would have been if it had been done at the time.
If as an executor you find yourself unsure of how a property is owned you can check with HM Land registry so that you are prepared when looking for a solicitor. Knowing if you are going to need to apply for probate for the pre-deceased partner could save you money when it comes to negotiating the cost for the extra work.