What to do with house-inheritance?

[Inheritancequery1]

I’m buying a house with my DP. I have dc from a previous relationship. On my death they will receive practically 800k in insurance policies and death in service. So this leaves the question…do I buy the house as joint tenants or tenants in common? I’m so torn 😅 help

I think like people are saying this is something we will revisit as time goes by, my partner is aware of this and we both want fairness. As it stands right now, my dc will be more than looked after monetarily on my death. So I think it’s fair my partner gets the house. However if things change drastically job wise etc then we can revisit and change as necessary and again as they get older we will look at how things best divide up.

And that’s where the problems arise……..

But why would that be a problem if we both agree to what we want to happen to the house/money after second death

So for example a mutual will where the house is left to the other person. And on death of second person it goes to person x, y and z

Because you don’t have a crystal ball to tell you that everything will be the same by the time the first of you dies.

I’m thinking the mutual will would be more something we write later on in life…

I hate this stuff 🤣🤣🤣

Our wills contain a clause emphasising that mirror Wills are NOT mutual! 🤣

We’ve just reviewed and rewritten our mirror wills. When one spouse dies there is no need to make another, though they can if they wish. I leave all my assets to my husband and vice versa. On the second death the money is divided equally between the children , and if a child dies before me or my husband, the assets go to their children on second death, or if they have no children, they go to my other grandchildren. Neither of us would remarry, but if it did happen we know the surviving spouse would have to write a new will. We didn’t want trusts etc, we want control of our own affairs

Oh Lordy 🤣🤣

Ignoring the insurance / pensions and tax implications.

Tennants in common, you can will your share as you wish, often granting your partner a life interest and then the children absolutely. The main use of this arrangement is to avoid paying care fees. You can assign percentages of ownership.

Joint Tennants, both parties own 100% of the asset, and on the death of one owner, the other inherits the others "share" automatically, outside of any will or probate procedures (but not free of tax). It is assumed that is the joint tenancy is broken that the parties get 50/50 unless there is a deed stating otherwise.

That would entail a will trust, so the house would go into a trust, created by the will, giving say John a life interest and right to occupy, maybe even sell and buy another property - then on Johns death the trust would vest to say Ian and Jill who would be called in legalese the "remaindermen" at which point the trust ends and it is theirs absolutely.

There are benefits to this set up, John gets a home for life, but its not legally his, or the remaindermen, it belongs to the trust, meaning it can't be taken into account for care fees.

The value IS classed as part of Johns estate for IHT (although he never owns it), when it passes to Ian and Jill the capital gains sets to zero so CGT is only payable on increase in value from the date of death.

This also avoids problems after death, because the trust has to be followed, unless that is the beneficiaries and trustees agree to wind up the trust and distribute the asset - but everyone would need to agree to do that.

If you are joint tenants, your share on your death would automatically go to your partner, regardless of what the will states. It will then follow their will OR tenancy, so lets say your DH remarried and entered into property ownership with a new wife as JT, if he pre-deceased her, she would automatically inherit his share and it would pass according to her will.

This is why TIC and will trusts are such a great idea, they prevent such situations.

Joint tenants completely circumvents the will, the surviving "Tennant" immediately acquires the others share at the instant of their death - whatever the will states, that asset, ie their share of the house is no longer theirs as their ownership ends on their death.

This is because joint tenants own a notional 100% each, not 50/50, when one dies their notional share dies with them and the remaining tennant already owns 100%

Inheritance query1- yes you can. That’s what we have stated in our mirror wills, that after the second death, the assets are split between the children.
Honestopal… The surviving man spouse would have to make a new will on remarriage.

Spouse, not man spouse!

It’s called “sideways dis inheritance” I spend a significant amount of my working life trying to explain the problem and help mitigate against it.
Once a spouse/partner dies you see the true character of the other, for both good and bad

Wot she said

Why would you want to return to joint tenants.?
Especially as I have explained the advantages of TIC regarding care home fees?

This is the often encountered issue, as the Joint Tenancy automatically gives the survivor sole ownership the mirror will can only stand if that survivor retains that will. If they re-write their will at a future point then the asset, in its entirety passes according to that new will.

The model of TiC and a will trust resolves this issue whilst not removing the benefit of the property from the serving spouse, but protecting the deceased share against new wills, debt, bankruptcy, care fees etc for the next generation.

Mirror wills don't offer protection about decisions made by others down the road, even if they involve a clause severing joint tenancy on death, which there is case law on, but not much, it could result in a costly legal dispute. The generally adopted and accepted principle is that joint tenants means the property passes automatically and critically outside of any will.

Yes, my partner and I have done this. But as others have said if you marry after the will it becomes void and you have to do a new one, or else everything would go to your widower in the event of your death. But it’s no big deal to re-do a will.

Exactly, for a couple with children Joint Tennants gives no benefits and huge pitfalls down the road....

Joint tennents fails to protect the first deceaseds share from...

Re-marriage
Changes of wishes of the survivor
Care fees
Bankruptcy

There is absolutely no benefit, and so much to loose.

Can't see how that can work, JT takes precedence over a will, so say wife dies first, husband inherits, re-marries or re-writes will, everything goes according to that ownership.

You can only set up trusts based on TiC, trusts written in wills with JT automatically fail.

You are relying entirely on a statement of intent, that could be used to challenge any decisions of the survivor, but would entail a court case to decide.

There is a iron clad, fair and impenetrable way of doing it with TiC and a will trust, that is tax efficient and offers a multitude of protections whilst not disadvantaging the surviving spouse, why rely on chance...

I wouldn’t consider the death in service as they’re unlikely to receive this. The life insurance also may not happen. Do you know how much premiums rise as you age? This normally prevents people continue paying the premiums as it works out so much money compared with just banking some savings. My grandfather ended his after retirement as it skyrocketed and his payout amount wasn’t £300k. Give your children something concrete and fairly certain.

Here's some scenarios that show how JT is bad for established couples with children.

Jack & Jill own as JT, Jack dies, Jill inherits and goes into care, 100% of the value is counted for the care fees.

If they were TiC, Jack dies, leaves Jill a life interest in his share, Jill goes into care, only 50% is taken for her share, on Jills death Jacks share vests with the children.

Jack & Jill own as JT, Jill Dies, Jack inherits, Jack Re-marries and re-writes his will in favour of his new wife, Jack dies, everything follows Jacks new will

Jack & Jill own as JT, Jill dies, jack makes some bad decisions and runs into financial difficulties, the whole of the property is charged against and lost to creditors.

If they were TiC, as with care fees, Jills 50% that went into trust cannot be counted as jacks asset, his creditors can only charge his half.

JT is a great arrangement for a young couple, who have purchased together, don't have a family and may not have made wills as it automates the process - for couples looking to pass to the next generation in a guaranteed and tax efficient way JT is crazy bonkers, terrible idea.