We have recently received a number of enquiries from clients who call us to tell us that they must change the way they own their property to ‘tenants in common’. When we ask why they need to do this they explain to us that this is to save nursing home fees.
There appears to be information (and some ‘mis-information’!!) on the internet and generally circulating about this.
We would like to stress that it is extremely important that, rather than simply changing the way you own your property, you seek independent legal advice on the implications of this.
If you hold a property as ‘joint tenants’ (which is usually how property purchased by a husband and wife is owned) then this will pass automatically to the survivor irrespective of the terms of the Will.
This means that the survivor of you would own the property outright and would have absolute freedom to do with this what they wanted, including entering into an equity release arrangement for example. It would, however, mean that if the survivor of you went into care, the whole of the value of the property would be assessed for the purposes of calculating your contribution towards care fees.
If the property is owned as ‘tenants in common’ then your interest in the property would pass in accordance with the terms of your Will. If the terms of your Will are such that this leaves everything outright to the survivor of you, then the effect of changing the ownership to ‘tenants in common’ is irrelevant (because the half-share will pass under the terms of the Will to the survivor).
If the intention is to ensure that your children inherit your share of the house (even if your spouse were to re-marry or go into a care home, for example), then it is necessary to change your Will.
Our advice would be that the survivor of you receives what is known as a ‘life interest’. This means that the survivor would have only a limited interest in the share of the property left under the Will of the first person to die. You would only have the right to live in the property rent-free and/or for this to be invested in a new property and to receive the interest from that share of the proceeds of sale.
The Will needs to be drafted carefully to ensure that the Trustees of this Trust have the right powers and you will need to be fully aware of the implications of this.
For example, it could in future mean that the ability of the survivor to release equity from the property is affected.
The message is, please make sure you take independent advice depending on YOUR personal situation – merely holding the property as ‘tenants in common’ is only one part of the story.