Should Couples Take A Tenants In Common Agreement?Posted on: 27 October 2008 by Gareth Hargreaves
50connect reader Simon asks expert Peter McGahan whether couples should be taking out a tenants in common agreement.
Tenants in Common is a way to hold title, to own property, by two or more individuals. Sometimes it is referred to as Tenancy in Common.
There is no limit to the number of individuals who can hold title to one piece of real estate. A property held by tenants in common can be owned by two owners or more than 100 owners.
Reading the interesting article on Insuring For Care In Later Life, and specifically the related comment on the benefit of having a 'Tenants in Common' agreement with one's spouse - is it suggesting couples should take this action and are there other benefits, or otherwise, for having this agreement in place?
As with all planning there are pros and cons and naturally before you proceed you should chat this through with your solicitor. This approach is a very common method so should not be too painstaking and your normal solicitor should be more than happy to assist.
Tenants in common are also used as a method of inheritance tax planning (IHT). Basically the ownership of the first tenancy in common is used on first death to give to a discretionary trust or equivalent, thereby allowing the survivor to stay in the property but not legally own it. This reduces the estate for inheritance tax purposes.
So instead of the surviving spouse owning all the property they only own a tenancy in it, which for IHT purposes would be greatly reduced. The benefit is they are still allowed to live in the property.
I have, for instance, always believed that inheritance tax was only really payable on those joint estates which are more than three times the nil rate band. This would mean that tax is only payable on estates over £936,000 today.
Ensure you speak to an Independent Financial adviser before you plan any inheritance tax. All too often I see that people are advised to take out life insurance when in twenty years of planning I have only had to do this twice.
It is an all too common approach that simply makes sure the revenue receive their money as opposed to planning around it.
There are other benefits it has later on in life.
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