The great property handover: how to protect your home, and your family

Choosing the right ownership structure

When a property is owned jointly, how it passes on death depends on the ownership structure. There are two main types:

1. Joint Tenants

Where two or more people own a property as joint tenants, on the death of one owner, their share automatically passes to the surviving owner(s), regardless of, and outside, the terms of any Will.

Many married couples normally choose this structure, as it ensures the property passes seamlessly to the surviving spouse at the first death.

2. Tenants in Common

Under this structure, each owner holds a defined share of the property. This may be equal (for example, 50/50) or unequal.

Owning property as tenants in common can be particularly useful in second marriages or where there are children from previous relationships. It also allows greater flexibility for estate planning, including protecting a share of the property for children. The reason for this is that, in contrast to joint tenants, such a share in a property does pass via an owner’s Will allowing their specific wishes to be implemented.

Where property is held in unequal shares, it is essential that a Declaration of Trust is in place to clearly document each owner’s interest.

Making a Will

If a property is held as joint tenants, a Will does not affect how the property passes on death. However, where property is held as tenants in common, each owner should have a Will to ensure their share passes according to their wishes.

A Will enables you to:

• Control who inherits your share of the property.
• Provide for a spouse or partner.
• Protect assets for children or other beneficiaries.

Incorporating a trust within a Will can be an effective way to ensure that children or grandchildren ultimately inherit a property, whilst allowing a spouse or partner to remain living there during their lifetime. Further information regarding trusts can be found in our recent article, Trusts Decoded: when, why, and how to use them .

Trusts can also be used to support vulnerable beneficiaries or to provide flexibility where future circumstances are uncertain.

Without a valid Will, the intestacy rules (a fixed set of inheritance rules) apply, which can lead to unintended and often undesirable outcomes.

Inheritance Tax considerations

Whether a property is held as joint tenants or tenants in common, a deceased person’s share still forms part of their estate for inheritance tax (IHT) purposes, even though (in the case of a join tenancy) it passes automatically to the surviving owner(s).

If the surviving co-owner is a spouse, the spouse IHT exemption, under the current rules, will typically apply. However, where the co-owner is a cohabitee or another individual, no such exemption exists, and the IHT implications must be carefully considered, as the deceased person’s estate may be left picking up the IHT tab.

The same principle applies where property is held as tenants in common, although this structure allows for more deliberate estate planning in line with wider IHT objectives via a Will.

The Residence Nil Rate Band (RNRB) is a valuable relief, but it is often lost due to how property is owned or passed on. To benefit from the RNRB, specific criteria must be met, including covering the ownership structure of the property, whether it qualifies as a main residence, and who inherits it.

Preventing family disputes

Property is often both the most valuable and the most emotionally significant asset in an estate. Disputes can arise over whether a property should be sold or retained, or who has the right to live in it. To minimise the risk of conflict:

• Ensure your Will is up to date and clearly reflects your wishes.
• Consider including a trust where appropriate.
• Prepare a letter of wishes to guide trustees.

Although not legally binding, a letter of wishes provides valuable clarity and can help reduce uncertainty and potential tension between beneficiaries.

By putting the right structure in place, you can ensure your property passes according to your wishes while protecting both your wealth and your family’s future.

If you are considering reviewing your Will or planning how your home should pass in the future, our Private Wealth team would be delighted to provide expert advice and guidance.