Explained: Joint Tenancy & Tenancy in Common

In terms of inheritance and leaving a legacy or gift, Tenants in Common co-ownership offers the individual complete control. Furthermore, where property is owned as Joint Tenants, the whole value is means-tested when individual care is assessed. Something to ponder seriously as we live longer, private care costs continue to escalate and council care services contract.
— Jules Jack

 

What's the difference between Joint Tenants and Tenants in Common, and why is it important when making my Will?

There are many myths and confusing concepts in the world of estate planning, all of which have a habit of causing a bit of a kerfuffle, but also that aha moment upon realisation. None more so than the distinction between Joint Tenancy and Tenancy in Common, the two ways in which property can legally be jointly owned in England and Wales.

Joint Tenancy (a.k.a. Beneficial Joint Tenants)

More often than not,  this is the default position chosen by married couples/civil partners when purchasing a house. This could be because of what used to be called Tenancy by Entirety. This was unique to and applicable to spouses as they were thought of as a single entity. However, since 1925, all tenancy by entireties have been converted into joint tenancies and this is great where the parties involved are content for the survivor to be the absolute owner.

Anyway, back to the point of this essay. An aspect of Joint Tenancy is that each party has an equal share of the property.

Under Joint Tenancy, upon the death of the first spouse/partner, the rule of survivorship applies and interestingly, this trumps instructions within a Will and also the intestacy rules. Thus, the survivor will automatically inherit the deceased’s share and just for emphasis, this is regardless of what the Will or the Intestacy Rules say.

Example

The three siblings of the Sankofa family are all car enthusiasts and decide to purchase a classic car as Joint Tenants. If one dies, the other two will automatically become the surviving owners with equal shares in the car. This would happen even if their dearly departed sibling had made a Will and gifted the car to AN Other.

Tenants in Common

If you are married or in a civil partnership or indeed, own property with another party, I suggest you consider the following carefully with respect to inheritance.

As Tenants in Common, parties can own unequal shares of a property, the rule of survivorship does not apply (meaning your share of the property doesn’t automatically go to the other owner(s) when you die) and you can pass on your share of the property in your will (failing that, intestacy rules apply).

Example

The three siblings of the Sankofa family are all car enthusiasts and decide to purchase a classic car as Tenants in Common, all with equal shares. If one dies, the other two will not automatically become the surviving owners with equal shares in the car. If the dearly departed sibling had made a Will and gifted the car to a third party, it will be inherited by the named beneficiary. If not, the rules of intestacy will apply.

In terms of inheritance and leaving a legacy or gift, Tenants in Common offers the individual complete control. Furthermore, when property is owned as Joint Tenants, the whole value would be means-tested where care costs are assessed. This is something that must be seriously considered as we all live longer and care costs continue to escalate, become a premium and council services contract.

It is not a complicated process to change a Joint Tenancy into a Tenancy in Common. This is done via a simple process known as a Severance of Joint Tenancy. The most common method of severance is by one or more of the parties serving a notice in writing on the other co-owner(s). It can be done without the other owner’s cooperation or agreement and is recorded at the Land Registry. The other owner will know it has been done but only ‘after the event’ so to speak.

A friendly way to move from Joint Tenancy to Tenants is Common is by agreement of all owners, and a slightly different procedure is followed, but the end result is the same as above.

To emphasise, it is important that you have a Will prepared by a professional company or have a review in order to best safeguard your share of the house for your heirs.

For more information on this and any other estate planning matter, contact: jules@40RTY.co.uk or call 07814 838 660