Where a property is owned by more than one person, this is referred to as ‘co-ownership’. There are two types of co-ownership:
If you own a property as a joint tenant:
This means that if you indicate in your will that you would like your share in the property to pass to someone other than the surviving joint tenant(s), that provision will be ineffective. Your interest in the property will instead automatically pass to the remaining joint tenant(s) equally.
As the surviving co-owner(s) will be entitled to the property, you don’t need to do anything to transfer your share in the property to them. If there is only one surviving co-owner, that person will own the whole of the property and it will form part of their estate when they die.
In addition, because joint tenants each hold an indivisible share in the property, the consent of all joint tenants is needed if you wish to sell your share in the property.
In contrast, as tenants in common:
You will therefore be able to decide, and specify in your will, who will receive your share of the property – it will not automatically pass to the other tenant(s) in common.
Irrespective of the type of co-ownership, it is a good idea to record the shares that each of you own in the property using a declaration of co-ownership. This is a document allowing you to set out how the property is split between you.
You may decide you would like to change the way in which you co-own a certain property before you make your will. This could be for a variety of reasons. For example, you might like for your share in the property to pass, on your death, to someone one other than the remaining joint tenant(s). As mentioned above, this will not be possible under a joint tenancy (due to the right of survivorship).
One way to get around this is to ‘sever’ the joint tenancy so that going forward you hold the property as tenants in common. Severing a joint tenancy does not need to be done in writing, but it is best to do so to avoid problems in the future.
When you have severed a joint tenancy, it is important to notify the Land Registry (the public authority responsible for the registration of property and land in England and Wales) of the severance using Form SEV. If you do so, you will have the option of asking the Land Registry to add what is called a ‘restriction’ to the proprietorship register of the property. This prevents a surviving co-owner from selling the property without the consent of your personal representative(s). However, it is important to note that this is an exception; the general rule is that where a property is owned by tenants in common, the consent of the other tenants is not needed in order to sell a share in it.
If you are entitled to the income from a trust, then the value of the trust fund itself will be added to the value of your estate for the purposes of inheritance tax. The amount of tax due is then distributed between the estate and the trust.
The trustees of the trust fund will need to complete and submit a tax return to HMRC. It is important to note that your estate may continue to receive income from the trust after you die.