Married Couples Owning Property: Joint Tenancy or Tenancy in common ?

If you own a house or flat jointly, you can elect whether to be joint tenants or tenants in common. If you are joint tenants, then if one of you dies, the other becomes entitled to the whole of the property automatically, irrespective of what the deceased's will may say. If you are tenants in common, then your wills govern your respective shares.

It is most important, when buying a house or flat jointly with your spouse, to consider the inheritance tax implications of being joint tenants as opposed to tenants in common.

When a husband and wife seek our advice about wills, the first thing we need to establish is the nature and value of the net assets they have. If the total value is more than £500,000, then there is a possible saving of £100,000 inheritance tax if the wills are worded in a certain way. (If the total is more than £263,000, there is still some tax that may be saved).

One course which we consider with such clients is for each spouse to include in his or her will a legacy in favour of a discretionary class of beneficiaries. This "family legacy" will however only come into effect on the death of the first to die. The surviving spouse will be one of the beneficiaries in normal circumstances.

On the first death, property up to the value of the inheritance tax nil-rate band (currently £263,000) will go into the family legacy. The surviving spouse can have the benefit of it, but the object is for it to be excluded from his or her estate on death, for inheritance tax purposes.

A couple may, in this way, make use of two inheritance tax nil-rate bands: if the first to die left his or her estate outright to the survivor, there would be only one nil-rate band available.

Of course, for the family legacy to work, each spouse must have property of which they themselves can dispose by will. If they are joint tenants, this is not the case.

If you and your spouse have net joint assets of more than £263,000 in value, we suggest that you review the effectiveness of your wills - or that you make wills if you do not already have valid ones (e.g. if you have married, or remarried, since you first made wills).

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