Will the way you own your house cost your money?

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Published: 24th September, 2019

Tenants in common vs joint tenancy?

I have to say that I found it a little ironic the other day when a news programme had items about both the obesity crisis and the fact that Greggs the bakers had reported record profits.  It is no wonder we have an obesity crises.  We are all stuffing our faces with sausage rolls.

Changes to Inheritance Tax

Another example of irony is the government talking about making the Inheritance Tax system fairer while at the same time massively increasing the fees payable to the Probate Registry to obtain a Grant of Probate. Oh no, sorry. That is hypocrisy.

It is an important point to be aware of, though, particularly as it might mean that many people who made Wills containing trusts should now review them.

A Grant of Probate is a document which needs to be obtained from the Probate Registry to deal with many estates.  Until now, there has been a flat fee payable to the Probate Registry of £155. It was recently accounted that from the beginning of April this will change to a tiered system under which the fee payable will depend upon the value of the estate.

At the time of writing, the change hasn’t, in fact, yet happened as it hasn’t yet had the necessary approval from the House of Commons (which has been rather busy lately). This appears, however, to be a temporary reprieve.

There will be some winners, because the threshold below which no fee is payable at all is increasing, but for the vast majority of estates the fee will be higher. For the most valuable estates, the fee will increase by almost 4000%.

Trusts in Wills and why you might have changed your house ownership

The point about Wills containing trusts is that it was common at one point for husbands and wives to include trusts in their Wills known as Nil Rate Band Discretionary Trusts which were intended to save Inheritance Tax on the second death. As part of the arrangement, it was also common for such spouses to change the way in which they owned their house from a joint tenancy to a tenancy in common. The reason for this is that where joint owners hold the property as joint tenants, the property automatically passes to the survivor on the first death outside the estate of the first to die. Where they hold as tenants in common each has their own share to leave to whoever they want through the terms of their Will. The reason for changing was therefore to ensure that on the first death the share in the house of the first spouse could be used to fund the trust.

Due to subsequent changes in the law, the Inheritance Tax planning reasons behind such trusts is generally no longer relevant and Nil Rate Band Discretionary Trusts can also conflict with the recently introduced Residence Nil Rate Band. The increase in probate fees is another important reason to reconsider them.

Tenants in common vs joint tenancy?

If you hold as tenants in common, the half share in the property of the first spouse will come within their estate and will therefore be taken into consideration in calculating the size of the estate for the purposes of the probate fees. If you hold as joint tenants the half share will pass automatically to the surviving spouse outside the first estate and will not be taken into consideration for probate fees. Holding as joint tenants rather than tenants in common could therefore now potentially save thousands of pounds in probate court fees.

Up until now, the flat fee of £155 has always been considered to be an administrative fee in respect of the work the Probate Registry carries out to issue the Grant. That work is little different regardless of the size of the estate and the new fee structure bears little resemblance to the work involved. It is therefore difficult to avoid the feeling that whereas the old fee was an administrative charge, the new structure represents a tax by any other name.

Why should I convert ownership back to a joint tenancy?

Regardless of the morals of this, if you hold your property as tenants in common you should speak to us urgently. There can still be reasons for doing so, but many people will want to convert their ownership back to a joint tenancy.

Paying many thousands of pounds of probate court fees needlessly for the sake of taking some proper advice could be described as ironic.


Mark Jones - Wills & Probate Solicitor - HarrogateThis article was written by Mark Jones. Mark is a Partner in our Personal Law Department and is based in Harrogate.

Mark specialises in the creation and administration of trusts, tax planning and wills as well as probate work, particularly those where the family has fallen out and contentious issues have arisen.

You can contact Mark on 01423 502211 or email directly.