Most couples own their home as joint tenants. This means that they each own 100% of the home so when the first person dies it automatically becomes the property of the survivor. By changing the way the property is owned to tenants in common each person owns their individual share of the property, normally 50%. When the first person dies, they don’t leave this share to the surviving partner but a life interest. This allows the survivor to benefit from the first to dies share without becoming the legal owner. On their death it passes to the eventual beneficiaries, normally the children.
For example; John and Margaret have assets worth £300,000 together, primarily in the value of their home which they own as joint tenants. John dies before Margaret, leaving her his share in the home and all his other assets.
Two years later Margaret moves into a local care home. Fees are around the national average and after the deduction of her income costs £30,000 per year. She lives for a further 7 years and her children inherit £90,000.
However, if they had been tenants in common and John had left a life interest, Margaret would still of been able to live in the home but when care was needed John’s half share would have been protected from the local authority assessment. Margaret’s care costs would have taken her estate down to the £14,250 local authority threshold (the level at which the local authority pays all care costs).
This would mean that the children inherited the £150,000 from John’s protected share in the property along with the £14,250 left of Margaret’s. Leaving an additional £74,250 to the children.
For more information please contact hello@richardsonswills.co.uk or call 01904 501910