Probate: joint tenants/tenants in common of house

[Probateissues]

Hi,
Are there any probate/private client solicitors on here who could advise briefly please?

I’m sorting out the estate for my father in law who died this summer. His wife died 3 years ago. They had a house which was held as joint tenants. After her death my father in law was advised to sever the joint tenancy and he did this by way of a deed of variation - my mother in laws share went to their daughter.

We submitted Hmrc inheritance tax forms and reported the estate as property being owned as tenants in common etc. I’ve been chasing the solicitors to get a copy of the title and they’ve just admitted they closed the file without sending off the Land Registry application (despite us paying for it)! And therefore the title still shows my parents in law as joint tenants.

So now we’re trying to sell the house. The title shows my parents in law as joint tenants. There is a completed deed of variation showing that the tenancy has been severed and owned between my father in law and his daughter. The solicitors are telling me it doesn’t matter and we can go ahead with the sale without registering the deed as the title all vested in my father-in-law anyway and now left to the daughter. I am worried that this won’t marry up with Hmrc’s understanding of the position.

Can anyone advise if the solicitor’s advice is correct?

Many thanks

What strikes me as utterly bonkers is the idea that you can sever a joint tenancy after one of the the joint tenants has died. You simply cannot do that. Who advised you to do that?

I may have used wrong language. I think it works as my FIL was sole beneficiary under MIL’s Will, and he decided to gift her half share of the property in the Will (ie via DoV), thereby severing tenancy?

The joint tenancy was severed when your MIL died, and it then wholly belonged to yoeu FIL. It is usual at this stage to inform the Land Registry of the death and change of ownership. But even so, it was then the property of your FIL, to leave as he wished. If he changed his will to leave half to their daughter, that's fine - it's hers (plus anything else she's left in the will). There was no tenancy to sever at that point, it was all owned by him.

For inheritance tax, the full value of the house has to be listed along with the value of the rest of his estate.

There is, I suppose, a chance he gifted half to her in the past (or intended to) and created a joint tenancy, in which case she already owns half ( if it has been done legally). Not sure how this would be handled for IT, given the gift is within 7 years of his death, but probably taxable.

Thank you - I don’t think I’ve explained it very well. Mil and fil owned as joint tenants. Mil died and obviously it all passed to fil. Fil was advised, as sole beneficiary under mil’s will, to vary MIL’s Will so her 50% share went to their daughter. I understood that this meant that then daughter and fil held as tenants in common? Severing joint tenancy perhaps the wrong expression?

The problem we have is this hasn’t been regd by the solicitor at the land registry. And title still shows mil and fil (both now deceased) as joint tenants.

We’ve included full value of property in inheritance tax return.

Sorry it’s so complicated and if I’m not explaining it very well

My understand is that if a house is jointly owned the value cannot be split in circumstances like you described. Mil and fil owned the whole house jointly as one asset. It cannot be split. When she passed away he owns the whole house. They would only have been able to do the variation to allow her to own half if mil and fil had owned as tenants in common originally. They can vary the will to include the daughter but I imagine this would have to be a monetary amount, any amount would be subject to inheritance tax, which she could then use to buy half the house from fil and own as tenants in common if that was how it was decided. . Not an expert but my understanding from when we decided to own as tenants in common.

My DM and DF were divorced but still joint tenants, When DF died the house auto matically became my mums, it was not part of probate.
Your FIL would not have inherited half the house from your MIL as it was his house.

A joint tenancy (which passed to your FIL's sole ownership) will not have been part of your MIL's estate, so altering her will* wouldn't have changed the house ownership. It sounds like whatever your FIL was advised to do was a) incorrect and b) didn't happen anyway, so best now to look at what your FIL's will said, and act in accordance with that. Even if it had been registered in the daughter's name, a large gift within 7 years of the person's death would still be counted for inheritance tax, so it would make little difference.

The executor of FIL's will should inform the Land Registry of new ownership when its all settled.

• I don't think you can alter the will of someone after they've died - more likely the beneficiary (FIL) was gifting something to their daughter, or refusing a part of the bequest (though the house wouldn't be part of this) so the rest went to her.

@crabbyoldbat

A joint tenancy (which passed to your FIL's sole ownership) will not have been part of your MIL's estate, so altering her will* wouldn't have changed the house ownership. It sounds like whatever your FIL was advised to do was a) incorrect and b) didn't happen anyway, so best now to look at what your FIL's will said, and act in accordance with that. Even if it had been registered in the daughter's name, a large gift within 7 years of the person's death would still be counted for inheritance tax, so it would make little difference.

The executor of FIL's will should inform the Land Registry of new ownership when its all settled.

• I don't think you can alter the will of someone after they've died - more likely the beneficiary (FIL) was gifting something to their daughter, or refusing a part of the bequest (though the house wouldn't be part of this) so the rest went to her.

Yes you can. That's what a Deed of Variation does; it, in effect, rewrites all or part of the Will. It is also perfectly possible to retrospectively sever the joint tenancy. If the legal title wasn't amended by changing the land registry records, then the executors of your father's estate will be able to sell the property but half of the proceeds will then need to go to the beneficiaries of the DOV. OP, please be aware that not everyone replying here is qualified to give advice on this issue.

You can retrospectively sever a joint regency on the first death by way if a deed of variation so that is fine. As for the rest if no restriction is on the title to the land registry then dad’s executors can sell the house and sign the transfer. As the previous poster above said you just have to ensure the money is paid to the correct beneficiaries under dad’s will and under the deed of variation. If however the severance had been registered at the land registry there would be overreaching issues to consider but these appear to be moot this case so your solicitor is correct.

Thank you, and thank you thecognoscenti (I think you’ve interpreted my blurb and get what I’m talking about!). What I’m worried about is that we’ve reported to Hmrc that the property was held as tenants in common when the land registry doesn’t reflect this. It doesn’t affect the tax position as we included full value of house (as it’s an interest in possession). My concern is that the land registry position doesn’t reflect the deed of variation or the hmrc’s understanding of the position (as still showing as joint tenants for mil and fil). Sol says we can go ahead and don’t need to register the deed of variation/change in ownership with them. Is this true? I’m worried in case there’s any consequences of doing these when it doesn’t all marry up. Thanks so much

Thanks flowerofevil! That’s good to know

Also, it was the equitable (beneficial) interest in the property that was changed under the deed of variation and not the legal interest. The land registry would not have registered the deed of variation against the title as they are not concerned with beneficial interests. It also doesn’t matter if it differs from the HMRC forms submitted as long as the figures given and any IHT is correctly paid.

HMRC don’t need to know about the deed of variation unless it changed the IHT position in some way or you are claiming unused nil rate bands. Sounds like it is all good, don’t worry about it.

Thanks flowerofevil - this is really helping. Sorry to ask what’s probably a basic question but why is it not the legal interest? Is it equitable interest because it’s an interest in possession? Were fil and daughter holding as tenants in common?

I’m just trying to get my ahead around how this all fits together!

Can definitely be done as my mother didn't get round to doing this until 15 years after my father died. So effectively from that point, me and my sibling owned half the house, while my mother kept half but remained living there.

Upshot being she fell very ill a year later and house was to pay for her care but of course , at that point they could only take the half she owned.

I will try and explain it layman’s terms but don’t judge to harshly; Everyone on the title to land (land includes property) holds it on trust. Most owners hold it in trust for themselves as they also own the beneficial interest but some people don’t. For example I might be in the legal title of a house but it could be in a trust if some kind and I am only a trustee of that trust. The beneficiaries could be a charities or others like minor children. The land registry are not interested in who those beneficiaries are, they will only consider me as I am the legal owner even if I am holding the beneficial interest for others. I therefore can sell that house even though I have to account to the beneficiaries for the money, I don’t account to the land registry though. When mum died dad severed the joint tenancy by way of a deed so until his death he was holding the house as a trustee; he was holding half the beneficial interest under the deed he signed and the other half he was holding for himself. As the sole surviving trustee (named on the title) your dad could sell the house on his own and once he died he executors can on behalf of his estate. The land registry don’t care about the deed of variation because it only records the beneficial interest. It would be far to complicated (more like impossible) for the land registry to concern themselves with anything other than legal interests. They are only concerned with your dad and now his executors.
As I said before if the severance restriction had been recorded at the land registry then there are other issues to consider but this is moot

So what is the law here.

When there is a joint tenancy and one of the owners dies, the property automatically becomes the sole property of the other owner. It does not form part of the estate of the deceased. A Deed of Variation allows the beneficiaries to change the distribution of the estate. As the property is not part of the estate it logically can't be affected by a DoV, so severing the joint tenancy after death should be impossible as Collaborate and others have said.

However, the waters become a little murky when HMRC get involved. They say that, even though a joint tenancy cannot be severed in a will, it can be severed by a DoV under IHTA 1984, s 142 (see IHTM35092). So, according to HMRC, it is possible that the OP's FIL severed the joint tenancy using a DoV and gave MIL's share to his daughter.

Of course,. HMRC is not the final arbiter on matters of law. The courts may decide that HMRC have got this wrong if there is ever a case that turns on this point.

My wife is a private client lawyer and has just informed me that you can, by deed of variation, sever a joint tenancy after death, either by deed with the consent of the other joint tenant, or following an Inheritance Act claim.

Sorry for getting it wrong earlier.

Thanks prh47bridge and Flowerofevil for all your time and explanations. I’m finding it quite difficult to get my head around.

So the consequences of the solicitor not registering the deed of variation with the land registry (ie the tenants in common bit) is not terrible, and we can sell the house without updating the title even though it shows that my mil and fil hold as joint tenants? Obviously all proceeds go to daughter as beneficiary and she is a joint executor too. I’m a bit cross with the solicitor for not registering this. My fil paid for this, including LR fee, but if the consequences aren’t that dire perhaps it’s ok?

And thank you for unpacking it all, your explanations are very clear!

Thanks Collaborate - it’s a complicated bit of law I feel!

Hello, I'm a probate lawyer.

Yes, you can retrospectively sever a tenancy via deed of variation.

It doesn't matter that the tenants in common restriction was not registered (but do ask for money back from the solicitor if you paid for that!) The severance was still effective even if not registered. As previous posters have said, it just affects the mechanics of the conveyancing. The proceeds obviously need to be split correctly.

You've reported the right position re the property ownership to HMRC - but they are unlikely to ask any questions about it anyway from what you are saying.

Did a solicitor or accountant do your IHT forms and was there tax to pay? I'm interested in how you've dealt with that but it's probably too involved to go into in a Mumsnet thread!

I stand corrected.