When you purchase a property with someone else, it’s important to understand the type of ownership you have. The two most common forms of ownership are Joint Tenants and Tenants in Common, and each has its pros and cons. Choosing the right one can have a significant impact on your estate planning, especially when it comes to protecting your loved ones and avoiding unwanted fees or complications down the road.
In this post, we’ll explore the differences between Joint Tenants and Tenants in Common, weigh the benefits and drawbacks of each, and explain why including a Protective Property Trust in your Will is a wise move to prevent sideways disinheritance and shield your estate from care home fees.
Joint Tenants: Equal Ownership, Right of Survivorship
When you own a property as Joint Tenants, you and your co-owner(s) each hold an equal share in the property. You are essentially viewed as a single unit. One of the defining features of joint tenancy is the Right of Survivorship. This means that if one co-owner passes away, their share automatically transfers to the surviving co-owners, bypassing the need for a Will or probate.
Some key features of joint tenancy include:
Right of Survivorship: One of the defining aspects of joint tenancy is the right of survivorship. If one co-owner passes away, their share automatically transfers to the surviving co-owners. This process continues until there's only one surviving joint tenant, who then becomes the sole owner of the property.
Equal Ownership: Joint tenants have equal ownership shares. Regardless of their financial contribution to the property's purchase, each tenant holds an equal interest.
No Will Required: Due to the right of survivorship, the property does not form part of a deceased joint tenant's estate. Therefore, a will does not affect the transfer of ownership.
Tenants in Common: Separate Shares, Flexible Ownership
On the other hand, owning a property as Tenants in Common allows each co-owner to hold a distinct share in the property. These shares don’t have to be equal; for instance, one person could own 60%, while another owns 40%. Unlike Joint Tenants, there is no Right of Survivorship—when one owner passes away, their share becomes part of their estate and can be passed down according to their Will or the rules of intestacy.
Key features of tenants in common include:
Separate Ownership: Tenants in common can hold unequal shares in the property. For example, one co-owner may own 50% of the property, while the other owns 25% and 25%.
No Right of Survivorship: In the case of tenants in common, the right of survivorship does not apply. If a co-owner passes away, their share forms part of their estate and can be passed on according to their will or, if no will exists, under the laws of intestacy.
Flexibility and Control: Tenants in common have more freedom to deal with their share independently. They can sell, gift, or mortgage their portion of the property without the need for the consent of the other co-owners.
Pros and Cons of Joint Tenants
Pros:
Right of Survivorship: Ownership passes automatically to the surviving co-owner(s) without the need for probate.
Simplified Estate Transfer: The property doesn’t form part of your estate, which can simplify things for your heirs.
Equal Shares: Joint tenants always own the property equally, which can be ideal for couples or families who want equal ownership
Cons:
Lack of Flexibility: You cannot leave your share of the property to someone else in your Will, which can be a problem if you want to divide your assets differently. For example, if you're separated from your spouse, they will still inherit your property regardless of what is written in your Will to the contrary.
Loss of Control: If you want to sell or transfer your share of the property, you’ll need the agreement of the other co-owner(s).
Sideways Disinheritance Risk: If you pass away, your share automatically goes to the surviving joint tenant, which may lead to your children being unintentionally disinherited if the survivor remarries or has children of their own.
Pros and Cons of Tenants in Common
Pros:
Flexibility in Ownership: Each co-owner can own different shares of the property, depending on their contribution or agreement.
Estate Planning Control: You can leave your share of the property to anyone you choose in your Will, ensuring that your inheritance goes to the people you want, whilst also leaving provision for the co-owner.
Protection Against Sideways Disinheritance: You can protect your share of the property from passing entirely to the surviving owner, safeguarding your heirs’ inheritance.
Cons:
No Right of Survivorship: Unlike joint tenancy, your share doesn’t automatically go to the other owner, which could lead to delays or complications in transferring ownership after death.
Probate Required: Your share of the property will form part of your estate and may require probate to transfer to your beneficiaries.
Potential for Disputes: Since each owner holds a distinct share, disagreements over selling or making decisions about the property can arise.
Can I change how I own my property?
Yes, you can change the ownership so that you change from Joint Tenants to Tenants in Common and vice versa. This does require specific legal documents which need to be lodged with the Land Registry.
How a Protective Property Trust Can Help
A Protective Property Trust in your Will can be an essential tool when it comes to safeguarding your assets. This type of trust allows you to leave your share of the property to your chosen beneficiaries (such as children) while granting your spouse or co-owner the right to live in or use the property for the rest of their life.
Here’s how it works:
Upon your death, your share of the property is placed into the trust.
The surviving spouse or co-owner can continue to live in the property for the rest of their life.
When the surviving co-owner passes away, the trust ensures that your share is passed down to your intended beneficiaries, such as your children.
Why Is a Protective Property Trust Important?
1. Avoiding Sideways Disinheritance
Without a Protective Property Trust, your share of the property could end up in the hands of the surviving co-owner. This may lead to sideways disinheritance, where your children or other intended heirs do not inherit your portion of the property—especially if the surviving co-owner remarries or changes their own Will. A trust ensures your share goes to the people you intended, even after the other co-owner passes away.
2. Protection Against Care Home Fees
If your surviving co-owner needs long-term care, the property may be counted as part of their assets, potentially leading to the sale of the home to cover care home fees. By placing your share of the property in a Protective Property Trust, that portion is safeguarded, reducing the risk of it being used to pay for care and ensuring that your beneficiaries still receive their inheritance.
Final Thoughts:
Choosing between Joint Tenants and Tenants in Common is an important decision that depends on your individual circumstances and estate planning goals. While Joint Tenants can offer simplicity, Tenants in Common provides more flexibility and control, especially if you want to ensure your inheritance is passed down to specific beneficiaries.
To take your estate planning to the next level, consider incorporating a Protective Property Trust into your Will. It’s a powerful way to protect your assets, avoid sideways disinheritance, and shield your estate from care home fees—giving you peace of mind that your loved ones will be taken care of.
If you’d like advice on setting up a Protective Property Trust or have questions about joint property ownership, contact us today for expert guidance.
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