Asset Protection – The Family Home

As stupid as it may sound – most people don’t know how they own their home! Yes, they know that they own it outright (i.e. it has no mortgage on it) or they are buying it with the help of a mortgage. They also usually know whose name(s) is/are on the mortgage. But, importantly most don’t know that there are in law the following forms of ownership which can make considerable differences to how the value of the property is assessed for different circumstances. The forms of ownership are: 1. sole, where there is one person named as the owner; 2. joint tenants, where there is more than one person named as owners and 3. tenants in common, where there is also more than one person named as owners. So, what’s the difference?

The simplest is sole ownership where there is one owner whose name appears on all documentation relating to the property including any electronic registration at H. M. Land Registry.

The most common form of joint ownership is joint tenancy. Most people who own as joint tenants believe they own the property in equal shares. This is in fact, NOT the case. There are no shares of ownership – all tenants own it together and when one passes away, the other(s) inherit the deceased’s share by survivorship. So, there is NO WILL NEEDED to state where your share should pass, as it happens “automatically” under the terms of joint tenancy. So, a good way to own if you have no Will!  However, not so good if you don’t want your share of the property to pass to a co-tenant, but in to a Trust for example. Not good in the case of the long-term care costs mean testing either as ALL the value of the property can be assessed against ONE person. Commonly unmarried persons opt for this form of ownership as they see it as a simple way of ensuring that the other gets the property if the “worse” were to happen. But, what about all the other items in the Estate? Remember, they won’t pass under intestacy to the partner.

Finally, there’s tenancy in common – a form of joint ownership but WITH specific shares of ownership. This is indoubtedly the most secure form of ownership of property and gives percentage shares of ownership to each owner in the partnership. It DOES require a Will to pass the ownership to another and is commonly used to differentiate shares in property so that it can be passed in to a Trust for a variety of purposes. None of the tenants can be assessed as owning more than the value of their share either, so it is good in calculations against long term care costs too.ssSS

When planning your Estate and considering best options for Long-Term Care Cost planning and Inheritance Tax mitigation, the way your home is owned will undoubtedly be part of the process. If you do not own as tenants in common, most methods of asset protection planning, long-term care cost planning and tax planning cannot be used. We include a “Severance of Joint Tenancy” – which is a conversion from joint tenancy to tenancy in common, plus registration of that change at the Land Registry, – as part of our extensive planning services.