tenants in common vs joint tenants - pros and cons?

[whattodoo]

I'm sure this has been asked a thousand times before, but wanted some pointers to help us make a decision.

I have a property to sell which will leave me with £70k equity. I'll be putting this into a property to be jointly purchased with my DP. he is putting in £60k cash deposit.

We'll be taking out a joint mortgage of £140k. This will be based primarily on his income (3.5x salary), my (very low) PT income will be used for childcare, bills, sundries.

We plan to over-pay the mortgage every month so that we shorten the term.

I also have a couple of endowments which mature in 6 years' time. Will prob be worth around £30k. We'll use that to pay a chunk off the mortgage.
We have a DD (3yrs) and are not married. Will probably get married at some point down the line.

As I will be putting more money into the property (both initially and as a chunk when my endowments pay out), my DP suggests we buy as tenants in comment and get a Deed of Trust drawn up with a 75/25% split in my favour.

I'd like some pointers to clarify the pros and cons of tenants in common versus joint tenancy arrangements. And, whichever we choose, can it be changed at any point in the future, eg when (if) we get married and when I pay in the income from my endowments?

Both our aims is to protect our daughter's inheritence both in case either parent dies (which I guess we both will at some point!) and if we split. I am unable to have further children, but worry that if we split/I die my DP might get another partner and go on to have further children which could potentially 'dilute' my part of the estate which DD should inherit.

We went to see a solicitor to talk through this but my mind is swimming with it all and I could do with a no-nonsense, factual list of pros and cons, together with any pointers of things we should bear in mind and anecdotes which might help us reach a decision.

Can anyone help?

Thank you

Both our aims is to protect our daughter's inheritence both in case either parent dies (which I guess we both will at some point!) and if we split. I am unable to have further children, but worry that if we split/I die my DP might get another partner and go on to have further children which could potentially 'dilute' my part of the estate which DD should inherit.

If that's a real worry for you then I would got tenants in common as you can state in your Will to put your share into trust for your DD and therefore her inheritance from your share of the property will always be protected.

If your property was owned as joint tenants, then no matter what you write in a Will, if you were to die, then your share would automatically pass to your DP, and then what you've written above could be a possibility.

There are other points to make but I'm sorry I can't think at the moment.

Both our aims is to protect our daughter's inheritence both in case either parent dies (which I guess we both will at some point!) and if we split. I am unable to have further children, but worry that if we split/I die my DP might get another partner and go on to have further children which could potentially 'dilute' my part of the estate which DD should inherit.

If that's a real worry for you then I would got tenants in common as you can state in your Will to put your share into trust for your DD and therefore her inheritance from your share of the property will always be protected.

If your property was owned as joint tenants, then no matter what you write in a Will, if you were to die, then your share would automatically pass to your DP, and then what you've written above could be a possibility.

There are other points to make but I'm sorry I can't think at the moment.

But, if you state in a will that you left your interest in a property to someone other than your partner if it was a joint tenancy, then how would that work?

TIC is a nightmare for IHT planning, and also potential CGT liability as we are just finding out to our cost.

If you are putting in more and are not married, and are giving up work and income to undertake the care of your joint child I would buy as TiC, with a deed of covenant stating your share of ownership. However as I understand it, marriage means that all property is jointly owned anyway so would over-ride the TiC principle.

DO are TiC, and both have wills saying that our respective share goes to DS, but some arrangement re in trust and surviving parent can live in the house.

whattodoo - unless you want DP to inherit all of the property, you must hold under a tenancy in common. You will has no effect upon a share in a property held under a JT. By operation of land law that automatically goes to the surviving owners.

If you ever marry him, make sure you both either get a pre-nuptial agreement (long before the wedding) or you both realise that anything can happen on divorce.

FIL has just died and they had the joint tenancy broken years ago and became TIC for IHT purposes. They didn't update their wills when the IHT rules changed.

Dh and his sibs now own half the house and supposedly some land (although mil denies the land was TIC), and haven't put in any clauses about surviving spouse being able to stay in the house. It should get interesting!

The other problem with TIC and no trust is that even if the child is lovely and is perfectly happy with the surviving parent staying in the house, all it would take is for the child to become bankrupt or get a divorce, and the house would have to be sold to pay the creditors/settle the divorce.

So if you go for TIC (which sounds like the best option for you at the moment), make sure you get a trust so that the survivor has the right to the house as long as they live!

Another point about JT - in the past, people have been put off going for JT as the house then is inherited by the children in one fell swoop, and therefore more likely to fall into the band where you pay inheritance tax. But the IHT rules now allow married couples to transfer their IHT allowance. So as long as the estate (mostly house I assume) is worth less than 2x the IHT allowance, the child wouldn't have to pay inheritance tax. The rate is £325,000 at the mo, so £650,000 if you transfer.
www.hmrc.gov.uk/inheritancetax/intro/transfer-threshold.htm

Not relevant to you at the moment, because you aren't married, but worth knowing anyway, I think, because it's been a big stumbling block for lots of people in the past, but doesn't have to be now (unless you are lucky enough to live in a house lovely enough to be worth more than £650,000 :)).

ScaryTeacher - Joint Tenancy overrides even a Will so you could leave your share to the queen if you wanted, but it would still go to the DP.

Agree with Collaborate. TIC is best way to protect your DC's interest in the event of your death.

That's the point GBOF - it's a tenancy in common, have the legal docs for the house, but not the land, although a letter from the solicitor says it was done. I think mil is about to be hoist very high with her own petard, especially as the will does not mention that she has a life interest in the half of the property left to her sons.

Scary, that is very odd indeed. Standard practice with a Nil Rate Band discretionary trust would have been to automatically put in a life interest for the survivor.

I'm a will writer and quite often use Life Interests for people who are in second marriages, with children from the first marriage(s) who need to be taken into account. In those cases, the joint tenancy must be severed so that the life interest takes effect.

Thank you everyone. Confirmed what my gut was telling me. TIC is the way to go, with a Will and Trust document written so that each of us is protected in case our DD turns into the devil child and tries to turf out the surviving parent!
Thanks again.

btw I have an ad over on the Small Business section of Classifieds if you need a will, it's headed "5* Will Writer recommended by Mumsnetters".

They did it in 2002, mumblechum; we told them 18 months ago to put the joint tenancy back as the IHT rules had changed, but they did nothing about it. Everything else is left to mil, but half of the house and land to the sons. There is no life interest for the survivor in the will.

Oh dear. Do you think the sons will sell the house over her head? There are various options, but I think your MIL needs to take independent legal advice from someone who deals with contested probate. Not that it is necessarily contested at this stage, but it's a tricky area and she does need to protect herself in case there's a fall out in the future.

Scary teacher - once a joint tenancy has been severed it cannot be reinstated - it will remain a tenancy in common.

It's more along the lines of us needing the advice to protect ourselves Mumble, as mil is on another planet with finances and property, (there is reality, and then there is her version) and we will contest probate if she lies about the TIC for the land.

Her sons won't sell the house over her head, but we need to establish some ground rules re: maintenance of the property, and getting the revised ownership logged with Land Registry.

Too late to prevent the fall out; it's already happened, and we have been trying to deal with it for ages now. The advice Mil is taking is not independent, and I think they saw her coming, but she won't listen to us, and frankly, we've all stopped trying.

We are pissed off that they didn't tell us what they'd planned, as they have landed us with a CGT bill that could be racking up for another 20 years if mil lasts as long as her Mum did.

. Hmm. Definitely try to find a specialist contested probate lawyer then. Not something I deal with myself, but you could initially look at the law society website.

This is all complicated by the fact we are not in UK as we are posted abroad, so are trying to deal with this long distance. Dh's sibs are bearing the burden of it all at far closer quarters than us.

Our property is held in a tenants in common trust. Myself and husband are now separating. We want to buy a property each. What now happens to this trust? Does it carry on to our new properties?