If you are purchasing in joint names, you need to agree how you each wish to own the property. There are three primary ways to own property jointly:
- as joint tenants
- as tenants in common in equal shares
- as tenants in common in unequal shares
Each method has its own set of legal implications and consequences. Here's an explanation of each of the ways to own property:
Joint Tenants:
Ownership: Each owner has an equal and undivided share in the property. There is no specific allocation of shares; all owners collectively own the entire property.
Right of Survivorship: If one owner passes away, their share automatically passes to the surviving owner(s) without the need for probate. As a result, the last surviving joint tenant will ultimately own the entire property.
No Will Consideration: the property doesn't pass according to the terms of a will; it passes automatically to the surviving joint tenant(s) under the Right of Survivorship.
Tenants in Common in Equal Shares:
Ownership: Each owner has an equal and specific share in the property. For example, if there are two owners, each owns a 50% share.
No Right of Survivorship: There is no automatic right of survivorship in this type of ownership. Upon the death of an owner, that owner’s share of the property shall pass according to the terms of their will. If there is no will, the share of the property shall pass in accordance with the intestacy rules (laws of succession). This means that the property can pass to someone other than the surviving joint owner(s).
Will Consideration: In order to ensure that upon your death your share of the property passes to whomever you choose, you should seek advice about a making a will or the terms of any existing one.
Tenants in Common in Unequal Shares:
Ownership: Each owner has a specific share in the property and these shares do not have to be equal. For example, one owner may have a 60% share, and the other may have a 40% share.
Written Agreement: Owners have the flexibility to specify the exact proportions of ownership which can be tailored to reflect their financial contributions or any other agreement they have among themselves.
No Right of Survivorship: There is no automatic right of survivorship in this type of ownership. Upon the death of an owner, that owner’s share of the property shall pass according to the terms of their will. If there is no will, the share of the property shall pass in accordance with the intestacy rules (laws of succession). This means that the property can pass to someone other than the surviving joint owner(s).
Will Consideration: In order to ensure that upon your death your share of the property passes to whomever you choose, you should seek advice about a making a will or the terms of any existing one.
When choosing how to hold property, it's essential to consider the legal and financial implications of each option. It's important to note that the choice of ownership can have significant consequences in terms of inheritance tax liability and the ability to sell or transfer the property in the future. We will be happy to assist with selecting your preferred option and whether a Declaration of Trust is needed (note that in some circumstances, we may require one or both of you to obtain independent legal advice) but we are unable to provide tax or financial planning advice. It is important to take legal advice from a Trusts & Estate/Will Writing expert about a will if you wish to guarantee who will inherit any share in the property and ensure it meets your tax planning needs.
