Women's Finance
[ October 18, 2000 ]
Carving the Joint
By Jane Mack (TMFJane)
Bearing in mind that one can hardly chop a house in two with a chainsaw, this week's column has been prompted by a question on one of The Motley Fool's discussion boards about whether a couple should own their home jointly or on the basis of "half each".
It may seem a moot point if both names are on the Deeds of the house, but there's a jolly good reason for asking the question.
In legal terms, you can own a house with someone else either as joint tenants or as tenants-in-common and it's a very important distinction. But to ensure I don't confuse the issue by bandying the word "tenant" around too much I'll refer to joint tenants as joint owners. So let's look at the difference and examine some of the pros and cons:
Joint Owners
In this instance, two people simply own the whole house between them. There is no technical division of the property and, if one dies, ownership of the house passes automatically to the surviving partner regardless of whether there's a Will. Essentially, it means you cannot "gift" your share of the property to anyone else.
This also applies to people who are not part of a couple. Three siblings could jointly own a house, for example, and, if one dies, ownership automatically passes to the remaining two.
Usually when couples buy a home together they do it as joint owners. It's so common that solicitors handling the purchase sometimes even forget to suggest the alternative option! And, because lots of people don't bother to make Wills, this at least covers the problem of dying intestate since there'll be no arguments about who subsequently owns the whole house -- often the main asset in a relationship.
Tenants-in-common
Here the couple owns half each of the house. It's obviously a technical "half each" but it does mean that each tenant-in-common can leave their share of the house to anyone they like. It gives each partner an element of control.
Now this may be a good thing in certain circumstances. But it can also open a huge can of worms! Frankly, it depends on whether you're the one who dies first or whether you're the survivor as to how you might want things to pan out.
First off, it's obvious that, in the case of friends or siblings who share ownership of a property, that being tenants-in-common is probably a good thing. If you've inherited your parents' house with your sister you'd probably prefer to leave your half share to your husband or your children rather than her. She's already got her portion after all and you're entitled to do what you like with yours. It might prove inconvenient for her if you pop your clogs and she has to sell the inherited house in order to pass on your share to your family. But that's tough! At least, as a tenant-in-common you've got the choice about who gets what.
On the other hand, if you're the surviving sister and you've got to sell the home you grew up in so you can give her money-grubbing husband who's never done a day's work in his life his half share, you might wish you'd never heard of the phrase "tenants-in common"!
Being a tenant-in-common with one's spouse or life partner also raises questions. Lots of them. It depends on what your circumstances are and how much control you fancy exercising from the grave.
There are certain advantages. For example, you can leave your half share to your children in your Will so that, if your surviving partner ever has to go into a nursing home, the local authority would only have the right to use his half of the house to pay for it. It would also mean that, if your partner married again, he wouldn't be able to leave the whole house to Your Replacement! In both cases, your children would still get the half share you've left them.
But what happens if your kids aren't as trustworthy as you thought they were? What if one of them is desperately in debt, and tries to force the sale of the house to get his share? If you think it doesn't happen then read this tale of woe -- though you could get around it by leaving your partner a lifetime's interest in your share, with it only going to the children when he dies.
Picture another scenario. You've left your half to the kids but have ensured that hubby has a lifetime's interest. What if, ten years after your ashes have been scattered all over the Lake District, one of the kids gets divorced and the exiting spouse is entitled to include the inheritance you've left your child as part of the matrimonial property? Your child can't get any money out of the family home because you've left your husband a lifetime's interest, but he's richer on paper than he actually is. He'll have to find the alimony from elsewhere -- and that could leave him broke. Not what you had in mind, perhaps.
There are all sorts of other considerations -- and I haven't even mentioned Inheritance Tax! Which is why it's so important to discuss such things with your partner, and to sort out a Will.
As you might imagine, where couples are concerned, I think joint ownership is the easiest and preferable option. Unless you've got such a huge house that planning for Inheritance Tax through the generations is a necessity, it simply doesn't seem fair to inadvertently shackle, or be shackled by, someone you've loved.
Where Next?
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