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tenants in common/joint tenants
Since the new ineritance tax rule where a surviving spouse can use the deceased's allowance, (effectively making the allowance �600000 upon the second death) does it now make no difference if you are joint tentants or tenants in common?
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Property owned by joint tenants is seen as one entity and the entire property automatically reverts to the surviving co-owner upon the death of the first. This cannot be altered by a will.
Where property is owned by tenants in common each of the co-owners is deemed to own a discreet half of the property and this is theirs to do with as they wish by means of their will.
This effectively means that the surviving owner (as tenant in common) can see the half of the property that they do not own being willed to somebody else following their co-owners demise.
No IHT is paid on any transfer of assets on death between spouses (if both have the same domicile), but, this merely delays payment of IHT until the second death. However, changes (which I believe you are referring to) announced by the Chancellor mean that following deaths on or after 9 October 2007 it has been possible for spouses and civil partners to transfer their unused inheritance tax nil rate band allowances. So if the first one to die leaves all their property to their spouse no IHT is payable and the full IHT Nil Rate allowance (currently �300,000) can be transferred to the survivor meaning they have �600,000 free of IHT.
I might be wrong, but as far as I can see, provided the co-owners were married (or civil partners), lived together and wanted to leave all of their estate to the survivor, there was no difference (as far as tax payable is concerned) between either of the ownership methods under the old arrangement and there is no difference now. Complications arise only when one of the partners wants to leave substantial amounts to somebody other than the surviving co-owner. (and this, in fact, is the main reason for adopting the tenants-in-common approach).
It has always been possible to take advantage of this facility by means of trust law and the new arrangement just makes the transfer of IHT allowance simpler.
Where property is owned by tenants in common each of the co-owners is deemed to own a discreet half of the property and this is theirs to do with as they wish by means of their will.
This effectively means that the surviving owner (as tenant in common) can see the half of the property that they do not own being willed to somebody else following their co-owners demise.
No IHT is paid on any transfer of assets on death between spouses (if both have the same domicile), but, this merely delays payment of IHT until the second death. However, changes (which I believe you are referring to) announced by the Chancellor mean that following deaths on or after 9 October 2007 it has been possible for spouses and civil partners to transfer their unused inheritance tax nil rate band allowances. So if the first one to die leaves all their property to their spouse no IHT is payable and the full IHT Nil Rate allowance (currently �300,000) can be transferred to the survivor meaning they have �600,000 free of IHT.
I might be wrong, but as far as I can see, provided the co-owners were married (or civil partners), lived together and wanted to leave all of their estate to the survivor, there was no difference (as far as tax payable is concerned) between either of the ownership methods under the old arrangement and there is no difference now. Complications arise only when one of the partners wants to leave substantial amounts to somebody other than the surviving co-owner. (and this, in fact, is the main reason for adopting the tenants-in-common approach).
It has always been possible to take advantage of this facility by means of trust law and the new arrangement just makes the transfer of IHT allowance simpler.
Well you are right in your analysis between old and new rules, NJ.
The deal under the old rules was that tenants-in-common was the first step to minimising IHT. But you also had to combine it with some kind of trust arrangement in a Will, so that the surviving partner could stay living in the house without actually owning the other half.
Strikes me the new rules make it easier all round, with the added benefit of doing a few solicitors out of money from writing these tax avoidance clauses into Wills.
The deal under the old rules was that tenants-in-common was the first step to minimising IHT. But you also had to combine it with some kind of trust arrangement in a Will, so that the surviving partner could stay living in the house without actually owning the other half.
Strikes me the new rules make it easier all round, with the added benefit of doing a few solicitors out of money from writing these tax avoidance clauses into Wills.
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