Last week, we spoke about the difference between joint tenants and tenants in common. This week, we chat about the consequences from an estate planning point of view.
Joint tenants versus tenants in common – why does it matter? If you want to leave all of your assets to your spouse or partner, then it may not matter too much (although it’s probably best to own property as joint tenants, which will save time and money for your partner when you die because the property can just be transferred to the survivor, without needing to go through your estate).
But I don’t want to leave all of my assets to my partner! You’re not alone – there are lots of reasons why you would not want your entire estate to go to your partner. For example, couples who have children from previous relationships may have pooled their resources to buy a house together, but want their contribution to the purchase price to end up with their own children, rather than their partner’s children.
I’m not sure I get how this works. Can you give me an example? Sure. Let’s take Jim and Jane, and let’s say that Jim and Jane own their home as joint tenants. Let’s also say that Jim and Jane both have children from previous relationships. Jim has prepared a simple Will which leaves all of his assets to his children, and nothing to Jane. If Jim dies first, then all of Jim’s assets go to his children – except the property, which will go to Jane. Jane ends up with the property, and Jim’s children receive any assets that were in Jim’s sole name.
However, the situation is different if Jim and Jane own the property as tenants in common. Let’s say Jim owns 50% as tenants in common, and Jane owns the other 50%. If Jim’s simple Will leaves all of his assets to his children, and nothing to Jane, then if Jim dies first, all of Jim’s assets go to his children – including his share of the home. After Jim’s death, Jane will continue to own her 50% share of the property, and Jim’s children will own the other share – so if Jim had two children, each child will own 25% of the property.
Owning property with my partner’s children? What’s wrong with that? Well, if Jim’s children want cash immediately, they’ll want to sell the property, whereas Jane might want to stay. Jane could buy out Jim’s children (if she can afford it), or she might offer to pay them rent. They’ll need to find a way to resolve their differences, and if they can’t, the Supreme Court certainly will – but it will be a long and expensive process.
Next week – The solution – life interests and rights to reside
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