Jointly owned property may or may not form part of a deceased person’s estate, with the determining factor being the specific type of joint ownership arrangement-whether the property is held as ‘joint tenants’ or ‘tenants in common’.
Inheritance tax considerations are becoming increasingly important for property owners in the UK. In the 2021-2022 tax year, 4.39% of UK deaths resulted in an Inheritance Tax (IHT) charge, affecting 27,800 estates-a 3% increase from the previous year. The value of inheritances in the UK has grown substantially over time, doubling from £24 billion in 1979 to £98 billion by 2020, with the average reported estate value climbing from £95,000 to £352,000 during the same period. With inheritances in England expected to peak in 2046 at roughly 2.4 times their 2021 value, potentially exceeding £230 billion annually across the UK, understanding whether jointly owned property forms part of your estate has never been more important.
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Is Jointly Owned Property Part of an Estate?
Joint ownership of property in the UK comes in two main forms: ‘joint tenants’ and ‘tenants in common’. Despite both terms containing the word ‘tenant’, neither relates to renting-they simply refer to different legal structures of co-ownership. The distinction between these two forms is vital as it determines whether property becomes part of someone’s estate upon death.
Joint Tenants: Property Passing Outside Your Estate
When property is owned as joint tenants, each person owns the whole property together with the other owner(s), regardless of their financial contributions. The key feature of this arrangement is the ‘right of survivorship’. This means if one co-owner dies, their interest in the property automatically passes to the surviving co-owner(s), bypassing their will or the intestacy rules. The property therefore does not form part of the deceased’s estate for distribution purposes.
This automatic transfer can simplify matters considerably for the surviving owner, as they won’t need to go through probate for the property. However, it’s essential to note that Inheritance Tax implications may still apply even though the property passes outside the will.
Tenants in Common: Property as Part of Your Estate
Conversely, owning property as tenants in common means each owner has a distinct share-which need not be equal. For example, one person might own 60% while another owns 40%, often reflecting their respective financial contributions. When a tenant in common dies, their share does not automatically pass to the other co-owner(s). Instead, it forms part of their estate and passes according to their will or, if they don’t have one, the intestacy rules.
This arrangement provides more flexibility in estate planning, particularly for those wishing to leave their share to someone other than the co-owner(s), such as children from a previous relationship.
How Can I Tell Whether a Property Is Owned as Joint Tenants or Tenants in Common?
For properties in England and Wales, this information is typically recorded on the title deeds held by the Land Registry. If the property is registered with the Land Registry, the title register will indicate whether it’s owned as joint tenants or tenants in common.
If you don’t have access to your title deeds or are unsure about your ownership status, you can obtain an official copy of the title register from the Land Registry for a small fee. Alternatively, the solicitor who handled your property purchase should be able to provide this information.
Can I Change from Joint Tenants to Tenants in Common?
Yes, it’s possible to change from joint tenants to tenants in common through a process called ‘severing the joint tenancy’. This can be done by one owner without requiring the consent of the other owner(s), making it a useful option if circumstances change or relationships deteriorate.
Severing a joint tenancy involves completing a formal notice and registering it with the Land Registry. Once completed, the property ownership changes to tenants in common, typically with equal shares unless specified otherwise.
The ability to sever a joint tenancy unilaterally is an important legal right. Any owner can take this action independently, allowing them to then will their share to anyone they choose. This provides an important protection for property owners whose circumstances have changed since the initial purchase.
At Property Saviour, we’ve seen many cases where property owners have needed to change their ownership structure to better protect their interests or align with changed family circumstances. Our property experts can provide guidance on this process if you’re considering such a change.
Inheritance Tax Implications for Jointly Owned Property
Understanding the inheritance tax implications of jointly owned property is essential for effective estate planning. The table below illustrates how different ownership structures affect inheritance tax:
| Ownership Type | Part of Estate? | Passes To | Inheritance Tax Considerations |
|---|---|---|---|
| Joint Tenants | No – passes outside estate | Surviving owner(s) automatically | Still counted for IHT calculation purposes; may benefit from spousal exemption if applicable |
| Tenants in Common | Yes – forms part of estate | According to will or intestacy rules | Part of IHT calculation; individual nil-rate band can be utilised |
As shown in the table above, even when property passes automatically to a surviving joint tenant, it isn’t exempt from inheritance tax considerations. For joint tenants, the deceased’s share of the property is still counted as part of their estate for inheritance tax purposes, though there may be no tax to pay if the total estate value is below the threshold (currently £325,000) or if the property passes to a UK-domiciled spouse or civil partner.
For tenants in common, the deceased’s share forms part of their taxable estate and may be subject to inheritance tax if their total estate exceeds the threshold. However, this arrangement can sometimes be advantageous from a tax perspective, as it allows for the use of both spouses’ nil-rate bands over time.
What Documents Are Required for Probate with Jointly Owned Property?
When dealing with probate for an estate that includes jointly owned property, the documentation requirements depend on the type of joint ownership:
Death certificate of the deceased
Property title deeds showing ownership type
Form IHT404 (for inheritance tax purposes) to be submitted with IHT400 if required
The deceased’s will (if any)
Grant of probate or letters of administration (for tenants in common)
Remember that even for jointly owned property that passes automatically, you still need to report it for inheritance tax purposes using the appropriate forms.
Common Problems with Jointly Owned Property in Estates
Keith from Cleckheaton recently faced a challenging situation when his father passed away unexpectedly. They owned their family home as joint tenants, but also owned an investment property as tenants in common. While the family home passed to his mother automatically, there was confusion about how to handle the investment property, especially as his father had left his share to Keith and his siblings in his will.
“I didn’t understand why one property was straightforward while the other required probate. The stress of trying to sort this out while supporting my mother was overwhelming,” Keith explained.
Keith contacted Property Saviour for advice on his options. As a property buying company that offers a we buy any property service, we were able to provide him with clarity on the legal position of both properties and offer a guaranteed sale for the investment property, providing his family with certainty during a difficult time.
If you’re facing similar challenges with inherited property or joint ownership, getting expert advice is vital. Property Saviour specialises in helping people in complex property situations, offering certainty and speed when you need it most.
How to Handle Forced Sale of Jointly Owned Property?
When co-owners disagree about selling a jointly owned property, the situation can become legally complex. Under the Trusts of Land and Appointment of Trustees Act 1996 (often called ‘TOLATA’), a co-owner can apply to the court to request a sale of the property.
The court considers various factors when making its decision:
The intentions of the person who created the trust
The purposes for which the property is held
The welfare of any minor who occupies the property as their home
The interests of any secured creditor of any beneficiary
If a person has an equitable interest in a property, they can apply to the court to request a sale under the provisions of this Act. The court has the power to make any order they think appropriate, including an order for sale. However, the welfare of any children involved would weigh heavily in such decisions, suggesting that courts may be reluctant to force sales that would leave children without suitable accommodation.
If you’re considering selling an inherited house or resolving a dispute over jointly owned property, getting professional advice is essential. Property Saviour offers a straightforward solution with our guaranteed purchase service, removing the uncertainty and potential conflict from the process.
What Happens to Joint Property After Divorce or Relationship Breakdown?
When relationships break down, jointly owned property can become a source of conflict. For joint tenants who are separating, it’s common to sever the joint tenancy and become tenants in common while arrangements for the property are being decided. This prevents the automatic transfer of the property if one party dies during the separation process.
For tenants in common, the existing shares remain in place until a formal agreement is reached or a court makes an order about how the property should be divided.
In cases where unmarried couples jointly own property and separate, questions often arise about forcing a sale to release equity. While legally possible to apply for a forced sale, the courts would consider the welfare of any children living in the property as a priority when making their decision.
If you’re dealing with jointly owned property after a relationship breakdown and need a quick, stress-free solution, Property Saviour can help. We understand these sensitive situations and can offer a guaranteed sale when you need certainty and speed.
Planning Ahead: Making the Right Decisions
When purchasing property with others, it’s important to consider which ownership structure best suits your long-term plans:
Choose joint tenancy if you want your share to automatically pass to the other owner(s)
Opt for tenancy in common if you want to leave your share to someone else in your will
Consider a Declaration of Trust to record unequal contributions or ownership shares
Remember that your initial decision isn’t permanent-you can change from joint tenants to tenants in common at any time, though changing in the other direction requires agreement from all owners.
At Property Saviour, we’re here to help if you find yourself dealing with complex property situations. Whether you need advice on jointly owned property or are looking to sell quickly, our team is ready to provide the support you need. Get in touch with Property Saviour if you need certainty and speed with your property matters-we’re committed to finding solutions that work for you during challenging times.
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