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• A Purchase in Joint Names

Introduction

It is commonplace for property to be owned by more than one person and most married couples buy their house jointly and have joint bank or building society accounts.

Despite this, many do not fully appreciate the effects of joint ownership of property in the event of death or indeed that there are two different types of joint ownership. In addition, the rising cost of family homes means that many families may now have to pay Inheritance Tax.

The first type of joint ownership, which exists unless there is an agreement to the contrary, is called a "Joint Tenancy". Joint Tenants jointly own the whole property and if or when one owner dies the whole of the property remains with the survivor even if the deceased has left everything to someone else in a Will. This would probably be inappropriate in the case of a business partnership, where two friends buy a house together or where joint owners each contribute to the purchase of the property in unequal shares and the owners wish to record that discrepancy.

The second type of joint ownership is "Tenants in Common". Tenants in Common each have a specific and defined share in the property. Those shares can be 50:50, 60:40, or such other shares as are appropriate to your particular circumstances. An agreement must be reached as to the proportions contributed by each owner and these shares should be formally recorded in a separate Declaration of Trust Deed which we can prepare for you. A "Tenancy in Common" is useful in the case of a second relationship or marriage , e.g. where each partner wishes to identify his or her contribution to a house purchase and preserve this for the children of the first marriage.

There can be an assumption that where property is owned by Joint Tenants then there is no need for the Tenants to make a Will as the survivor will automatically get the property. However it is impossible to know which joint owner will survive or for how long, and unless a Will is made other assets will be distributed in accordance with the intestacy rules. You should therefore make a Will to ensure that all your assets are distributed to those you intended to benefit.

A Will is also a useful tool for Inheritance Tax Planning. If the value of your home is likely to increase your total assets to, say, £350,000 or over, we would suggest you consider ways of reducing your liability to Inheritance Tax. The tax rules have changed and if, for example, you hold the property as Tenants In Common and leave each share to children etc subject to a life interest to the other joint owner, then this could now attract inheritance tax. If, however, a simple Discretionary Trust is established on the death of either joint owner, the tax burden is likely to be reduced and there is a greater degree of flexibility.

Ashfords is regulated by the Solicitors Regulation Authority. The information in this article is intended to be general information about English law only and not comprehensive. It is not to be relied on as legal advice nor as an alternative to taking professional advice relating to specific circumstances.