When the government introduced the possibility of transferring inheritance tax allowances, it did so only for married couples and civil partners. It is important that there is a right of survivorship that applies to an advantageous joint lease, so that after the death of a party, their interest in the property is automatically transferred to the survivor. This happens until there is only one tenant left, who becomes the sole owner of the property. Note that this applies regardless of the terms of the will. I HEREBY INFORM YOU THAT we are separating our advantageous joint lease agreement from and in 29 Acacia Avenue, Anytown AN1 5ZZ, which is now owned by you and me as joint tenants, both on the basis of law and equity, and from now on the property will be held by us as joint tenants in the actions listed below. confirm receipt of this notification by sending the double message attached to it. The potential benefits of owning real estate as joint tenants (especially for friends and unmarried couples who buy together and reduce IHT) are becoming increasingly well known. Due to the increase in the cost of housing, a property alone can push homes above the IHT threshold. Joint tenants first became increasingly popular, as they allow people to pass on the value of their home in two, effectively doubling the abatement. In 2007, Alistair Darling, then Chancellor, announced that married couples and partners could transfer their inheritance tax, but this was not the case for other co-owners who still had to use joint tenants. By dividing the house into two parts, half belonging to the first dying partner could be transferred directly to their children or to a particular beneficiary, and as long as half is worth less than £325,000, no tax is due. If the other partner dies, his half may be below the threshold, i.e.
more IHT. The changes to inheritance tax meant that married couples and life partners could, with immediate effect, pass on their individual allowance in the event of death, currently £325,000, which allowed for the bequeathment of up to £650,000. Therefore, most co-owners would generally prefer a joint lease, especially where the purchase is made with non-close family members. This is practically the opposite of the common rental scenario. In this case, each owner has a defined share of the property and is therefore free to manage it as he sees fit. When the property is sold, they are entitled to a certain share of the proceeds and, if they die, they can leave the interest in the property to anyone. As a co-owner, you all have the same right to live in the property – so if one person wants to sell, the rest must agree. This can create problems if you want a divorce, but if one of you wants to stay in the accommodation or if one of you from a group of friends has a new job and wants to leave the area. If you want to sell and others don`t, you have to ask for a court order that can be very expensive! One solution is to conclude, before the purchase of the property, a legal agreement defining the circumstances in which the property is sold.
Regardless of the situation of the property (and how it is treated for hereditary purposes), the deceased`s share in the common property will be part of the deceased`s estate for inheritance tax purposes (although an exemption naturally applies when the deceased`s share has passed to his or her spouse/life partner). . . .