What Happens to a Jointly Owned Property if One Owner Dies? (UK)
When one owner of a jointly owned asset dies, it can create a lot of uncertainty for the people left behind. In legal terms, assets or property owned jointly should pass automatically to the living owners when a co-owner dies, but there are several different types of ownership structure that can affect how this process works. Depending on the legal underpinning of the jointly owned assets, one owner's share of the property may pass into a trust or force the sale of the property after they die.
This can raise a lot of questions during the estate planning process. As the joint owner of a property, you may wonder whether you can pass your share of the property to your children or other beneficiaries. Alternatively, if you are the tenant of a property owned by more than one party, you may be concerned about your ability to keep living there if ownership passes directly to the surviving joint owner.
Under these circumstances, a process that seems straightforward can actually have significant ramifications during a time when many people are also dealing with the grief of losing a loved one. Here, the expert probate solicitors at JMW explain when property automatically passes to surviving co-owners, how you can protect your share of the property, and how you can resolve disputes regarding joint property ownership.
Does a joint ownership property automatically pass to co-owners when one party dies?
In some circumstances, a property owned by more than one owner will pass to any other owner after one person dies. Disputes sometimes arise when a surviving owner claims full ownership of a property but a will directs otherwise, but it is important to understand that this is a legal process that is followed regardless of someone's will. However, whether or not property passes to a surviving co-owner depends on the type of joint ownership in place.
There are two main types of joint ownership: joint tenancy and tenancy in common.
Joint tenants
Under a joint tenancy, both owners hold equal rights to the entire property. This means that when one owner dies, their share automatically passes to the surviving joint tenants under the right of survivorship. This applies regardless of what instructions are left in the deceased’s will. The property does not form part of the deceased's estate for probate purposes, so there can be tax benefits to this approach, and no formal transfer is needed (apart from updating the Land Registry records).
The final surviving joint tenant will automatically become the sole owner after any other owners die. If there are mortgage payments outstanding on the property, the surviving co-owner will be liable for these. They may need to provide a death certificate to the mortgage provider, or refinance the mortgage in their sole name. If the deceased had life insurance covering the mortgage, this may also be used to settle the debt.
Tenants in common
Under a tenancy in common, each owner holds a distinct share of the property. These may be equal shares, but this is not necessary. When one owner dies, their share does not automatically transfer to the surviving owner(s), and is instead inherited according to the instructions left in their will. If the owner did not write a will, the property is distributed under the intestacy rules.
Because the deceased person's share of the property is part of their estate, it could affect Inheritance Tax calculations. Inheritance Tax is a 40% levy on all aspects of an estate that exceed the current tax-free threshold, and can be a significant burden for estates that include property.
How can co-owners protect their property?
It is important to understand your needs before making decisions about property ownership. For example, a tenancy in common is often used in unmarried partnerships, business arrangements, or by owners who want to specify different inheritance plans for their shares. If joint tenants wish to change to tenants in common, they can do so by serving a Notice of Severance and informing the Land Registry, which can prevent a property from automatically passing to one person. Disputes can arise if a joint tenancy is severed, but the Land Registry is not updated at the same time.
However, it is not always necessary to do this. For example, as a married couple, there is limited risk involved in a co-owned property passing to one sole owner after the other person passes away, and there are other ways to protect the property without any increase in Inheritance Tax liability. A mutual will is technically a pair of wills drawn up by people (usually a married couple) who make a legally binding agreement that their will cannot be altered after the death of the first party. While there are downsides to this, it can be used to ensure that property passes to any intended beneficiaries when both co-owners die.
There are also ways to protect your property using a life-interest trust. This enables a surviving occupant of the property to remain living there after the owner dies without inheriting the ownership themselves.
Ultimately, there are several options in these cases through which you can achieve your aims. Speak to the expert private wealth team at JMW Solicitors today to learn more about estate planning and the options that are available, or our will disputes team if disagreements arise over a property.
Call us on 0345 872 6666 or use our online enquiry form to request a call back at your convenience.
