What to consider before and after severing a joint tenancy
Severing a joint tenancy is a legal decision that changes property ownership from joint tenants to tenants in common. It’s essential to understand the legal and financial implications both before and after making this change.
What is a Joint Tenancy and Why Sever It?
A joint tenancy is a form of property ownership where two or more individuals own equal shares in the property, with the right of survivorship. This means that if one owner dies, the other automatically inherits the entire property.
A severance of joint tenancy is often acquired to ensure that an individual’s share in the property can be passed to beneficiaries of their choice. For example, a property owner may wish to leave their portion to children or other family members instead of the other co-owner. You can learn more at https://www.parachutelaw.co.uk/severance-of-joint-tenancy.
Key Considerations Before Severing
Before severing a joint tenancy, it is important to consider how the change will affect your estate. Once the joint tenancy is severed, the other owner will no longer automatically inherit your share of the property upon your death. Instead, your share will pass according to your will.
Financial considerations are also key before proceeding with the severance. Severing the tenancy may affect how inheritance tax applies to the property.
Steps to Take After Severing the Joint Tenancy
Once the joint tenancy is severed, updating your will is essential to ensure that your share of the property is passed on according to your wishes. Without a valid will, your share could be distributed according to intestacy laws, which may not reflect your intentions.
Additionally, if the property is now held in unequal shares, it is advisable to draft a declaration of trust. This legal document records each owner’s share in the property and any financial responsibilities, such as contributions to the mortgage or upkeep. MoneySuperMarket explains what a declaration of trust is in further detail here:
Severing a joint tenancy provides greater control over property ownership, but it requires careful planning both before and after the process to protect your interests.
