Severance

Most couples who used a mortgage to buy their home or who have not received professional estate planning advice own their home and any investment properties as joint tenants. Whilst owning a property as joint tenants can be practical in that if one partner dies the survivor inherits the total value of the property outright irrespective of what might be written in a Will, it can also have very contrary financial implications e.g. If the time comes where one co-owner should need to be assessed for care costs the whole value of the property would be means tested. The care costs are significantly high (£600 - £900 per week) and if there is not enough savings to cover the cost then the debt, repayable to the local authority, is placed on the home and must be paid back when the house is sold. Therefore, the amount of money your children inherit can dramatically reduce. By changing the ownership of two or more names from joint tenants to tenants in common (TC) means that each of the co-owners own a share of the property allowing each co-owner of the property to dispose of their share/interest in the property according to the wishes laid out in their will. Referred to as a 'severance of tenancy' this legally binding document can reduce the liability to pay local authority care home fees by up to 50%.

Other advantages to holding your property as TC are should one person fall ill, have an accident, need care, get into debt or go bankrupt etc etc only that person’s assets can be set against the liability. In some cases, there can also be IHT tax saving advantages for holding the property as TC because Inland Revenue see owning half a house is not the same value as owning a whole house. (speak to your accountant about this). Also should you choose to leave your half of the house to different beneficiaries holding the house this way means you can stipulate your choices in the Will, thus protecting from sideways disinheritance should the surviving co-owner form a new relationship and change their Will in favour of the new partner and any step children.