Buying a new home with a partner can really cement your relationship – so it’s no wonder many spouses name themselves as joint tenants.
However, there are benefits to naming yourselves as tenants in common instead, particularly when it comes to later in life.
To learn a few of the key differences between joint tenants and tenants in common, read this blog. But if you want to know how the one you choose can affect you in later life, read on.
Protect your share
Simply put, when you’re named joint tenants, you and your partner own all of your home jointly. This means that if one of you were to die, the other would automatically become sole owner of the property.
If you’re tenants in common, you each own part of the property separately. You could have a 50:50 stake, or one of you may own a greater portion of the property than the other. Being tenants in common lets you decide this when you buy your home. And if one of you were to die, the portion they owned would be passed on to whoever they named in their will – it wouldn’t automatically go to the other owner.
How does this affect me in later life?
One reason that tenants in common became a popular option is that it increased the Inheritance Tax allowance couples were entitled to. Because as tenants in common the property is treated as being in portions rather than a whole, each owner is entitled to their own full Inheritance Tax allowance.
However, in 2007 the rules were changed so that spouses could transfer this allowance to each other upon death (although these rules do not apply to unmarried couples who live together).
So, why are couples still choosing to be tenants in common?
Funding later life care
If you or the person you own your home with has to move into a care home later in life, the local authority will carry out a means test to work out how much – if anything – you should pay towards this. The charity Age UK provides more information on this means test. As your home is probably your most valuable asset, it will be included in this test.
Now, because as joint tenants you and your partner own all of your home equally, if they move into a care home, the local authority is entitled to include the value of all of your home in its means test – even if you’re still living there.
However, if you’re tenants in common, because you each own a separate share of the property, only the portion owned by the person going into care should be included in the means test. This means that if your partner is going into care, your share of the property should not be affected and you can remain living there.
What should you do?
You may have chewed over whether to be named joint tenants or tenants in common when you bought the property and thought you wouldn’t have to think about it again. However, it is possible to change your type of ownership – and it’s usually free to do this.
It might be worth speaking to a solicitor before you go ahead with this to work out what the best course of action is for your situation. This can be particularly useful if you’re writing a will and thinking about inheritance.
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