Ensuring your home passes as you choose
Although property values have suffered recently, house prices continue to rise faster than most other investments and property is often the most valuable asset in someone’s estate when they die. But it is also a home and may need to remain a home for a surviving partner, spouse, or children. If you have a blended or extended family then you will wish to avoid conflict from different parts of your family who may feel they have a claim on the family home. You might wish to leave all or part of the property to a charity. There are numerous considerations.
‘A home is such a significant element of most estates that it is important to think about the legal implications and what you want to happen to your property after your death’, says Clare Moreton, a solicitor in the Wills and Probate team with Viewpoint Hill & Abbott Solicitors in Chelmsford. ‘Making appropriate legal plans during your lifetime and putting clear provisions in your Will can ensure that you achieve your objectives’.
As a sole owner, you are the only person entitled to the property, but if you own property jointly with another person or organisation then you should check with your solicitor whether you own your property in the most appropriate way.
Some arrangements may have terms which would overrule your Will, for example, if you purchased a share of a property in a shared ownership or sheltered living scheme or if you released capital via equity release.
If you own your home with another person, this may be as joint tenants. This means that when one owner dies, the home would pass automatically to any surviving owner(s). This type of ownership is common amongst those who have contributed equal sums of money to the property purchase and will likely suit you if you wish for your home to pass only to your co-owner.
Alternatively, property can be jointly owned as tenants in common, when each owner has a set share, which may be equal or unequal. With tenants in common, there is no automatic passing of your share to your co-owners. You need to ensure your wishes are clear so that your intended beneficiary receives your share. You also need to consider the position of your co-owners. For example, if your co-owner is to remain living in the property, there are things you can do to help protect their interest while leaving your property to another person or organisation.
When making legal plans for your future, including a new Will, it is important to consider how your property is held to ensure you can give effect to your wishes.
Gifting property in your Will
If you have purchased your property with a current partner and have children from a previous relationship, you may be concerned to ensure that while your children benefit from your estate, your partner cannot be made homeless. Even if you want your co-owner to inherit everything, you should also consider what might happen should either of you require care in the future. Owning and gifting property in the correct way can ensure that your partner is not rendered homeless should you need to move into a care home.
If you want a person or organisation, other than your co-owner, to inherit the home in which you live, one option is to include a trust in your Will. This can ensure your intended beneficiary will ultimately inherit the property while your co-owner can continue to live there for the rest of their life.
Outgoings and taxes
You should also consider the payment of any outstanding mortgages or taxes. The drafting of your Will determines who will be responsible for these costs. You may wish to leave your home to a specific person, but for the mortgage to be cleared beforehand. Or you may prefer for the beneficiary to pay the outstanding mortgage from the value of the property.
Inheritance, capital gains and income taxes should all be considered when making your Will. Consider who you would like to be responsible for settling these taxes, the person who is to receive the property or your estate. If you want your beneficiary to receive the property without having to pay tax, you will need to consider the effect of this on your other beneficiaries who will end up receiving less.
Your goal may be to leave your property in the most tax efficient way possible. If you leave your property to a spouse or civil partner, they will be exempt from the payment of inheritance tax. If you are unmarried and living as cohabitees, this exemption does not apply. Your estate may, also, benefit from the additional residence nil rate band, which was introduced in 2017. This can only be applied when leaving property to direct descendants, so any property left to someone other than your own children, or grandchildren and so on, will not benefit.
Leaving property to charity
Alternatively, you may be intending to leave your property to charity. If this is the case, the property will pass free of inheritance tax, as charities are also exempt. You will need to give extra consideration to how you wish the charity to receive the property. It may be suitable for the charity to use, for example as a home for their service users, in which case you might like the charity to receive the property itself. Alternatively, it may be better for the charity to receive the proceeds of sale so that it can invest the sums for other projects.
How we can help
Our private client solicitors can help you to determine the most practical and logical solution, bearing in mind the circumstances of your estate and your intended beneficiaries, as well as all relevant laws. Obtaining legal advice and instructing a solicitor to draft your Will for you ensures that proper consideration is given to these issues when gifting property.
If you are unsure about the terms on which you own your home, our solicitors can obtain this information for you and help you to understand its legal effect so that you are able to make the plans you choose.
For further information, please contact Clare Moreton in the private client team on 01245 258 892 or email email@example.com.
This article is for general information only and does not constitute legal or professional advice. Please note that the law may have changed since this article was published.
Clare Moreton, Head of Private Client is available to provide you with FREE initial advice.
Call Clare on: 01245 258 892
Email Clare at: firstname.lastname@example.org