The way you own property with others can impact how it is distributed in a will. There are two main ways of owning property jointly - joint tenants and tenants in common.
If you own property as joint tenants, the property automatically passes to the surviving owners upon your death. However, with tenants in common, you own a specific share of the property that can be included in your will and distributed according to your wishes.
If you’re unsure how you own your property, you can check the title deeds of land registry records. Alternatively, a solicitor can do this on your behalf when making your will.
Table of Contents
- How does tenancy in common affect wills and estate planning?
- What do tenants in common mean in a will?
- Can I leave my share of a property in my will as a tenant in common?
- Do you need probate if you are tenants in common?
- What happens if a tenant in common dies without a will?
- How does inheritance tax work with tenants in common?
- How can Lawhive help?
How does tenancy in common affect wills and estate planning?
When you own property as a tenant in common, you and the other owners each own a specific share of the property. This share doesn't automatically pass to the other owners when you die. Instead, it's your decision what happens to your share. This is where your will comes in.
As a tenant in common, you decide who inherits your share of the property when you die. This gives you more control over your assets compared to joint tenancy, where the property automatically passes to the surviving owner(s). With a will, you can specify exactly how you want your share of the property to be distributed. For example, leave it to a family member, a friend, or even a charity.
What do tenants in common mean in a will?
"Tenants in common" on a will refers to a specific type of property ownership arrangement that affects how your share of the property is distributed when you die.
When you designate yourself and another person (or multiple people) as tenants in common in your will, you each own a distinct share or percentage of the property, which may not necessarily be equal.
By specifying tenants in common in your will, you're indicating that your share of the property should be handled separately from the other owner(s). This means that you have the freedom to leave your share of the property to a specific beneficiary or beneficiaries according to your wishes outlined in your will.
Can I leave my share of a property in my will as a tenant in common?
Yes, you can! Being a tenant in common gives you the flexibility to decide who inherits your share when you pass away.
When it comes to leaving your share of a property in your will, the process is relatively straightforward. In your will, you'll need to specify that you're leaving your share of the property to the person or people of your choice. You should also clearly state the percentage of the property that you own. This makes sure there's no confusion about your intentions.
It's also a good idea to discuss your intentions with the other owners of the property, especially if they're also tenants in common. This can help prevent any misunderstandings or disputes in the future.
Do you need probate if you are tenants in common?
Yes, probate may be necessary for tenants in common when one owner passes away, as their share of the property becomes part of their estate.
However, probate may not be required in scenarios such as the existence of a living trust, changes in ownership terms, gifting of shares before death, or the use of a life estate deed.
Converting to joint tenancy with survivorship rights can avoid probate. However, this change must be made while all owners are alive.
What happens if a tenant in common dies without a will?
If you're a tenant in common and you die without a will (known as dying intestate), your share of the property won't automatically pass to the other owner(s) like it would in joint tenancy.
Instead, your share will be subject to the laws of intestacy in the UK, which means that the distribution of your share will be determined by a set of legal rules.
Probate disputes can arise when a tenant in common dies without a will, especially if there are multiple potential heirs or conflicting claims to the deceased's share of the property.
In such cases, it may be necessary to seek legal advice to resolve disputes and ensure a fair distribution of the deceased's assets.
How does inheritance tax work with tenants in common?
When you pass away as a tenant in common, your share of the property is included in your estate for inheritance tax purposes. If the total value of your estate, including your share of the property, exceeds the inheritance tax threshold, inheritance tax may be due on the portion that exceeds the threshold. The tax rate on the excess is currently 40%.
One advantage of owning property as tenants in common is that it allows you to utilise each individual's inheritance tax threshold effectively. By owning unequal shares of the property, you can ensure that each owner's share falls within their respective tax thresholds, potentially reducing the overall inheritance tax liability.
In the UK, each individual has an inheritance tax threshold, known as the "nil-rate band," which is the amount of their estate that can be passed on tax-free. However, there are additional allowances, such as the residence nil-rate band, which may apply if you're leaving your main residence to direct descendants.
How can Lawhive help?
With the two main forms of joint property ownership—joint tenancy and tenants in common—there are significant differences in how ownership is transferred upon death.
Choosing to be tenants in common provides the advantage of individual control over your share of the property, allowing you to dictate its distribution in your will. This level of autonomy ensures that your assets pass on precisely as you desire, whether to family, friends, or charitable causes.
At Lawhive, we're committed to simplifying legal processes and empowering individuals to make informed decisions about their assets. Our network of experienced lawyers stands ready to assist you with all aspects of wills, estate planning, and property law.
To get started, contact us for a free case evaluation and quote today.