My girlfriend lives with her father. When her mother died, she left 50 percent of the house to her.
She hasn’t put her name on the deeds yet, as her father said: wait until he dies, then she can change the whole thing at once.
Is this okay or will she have to pay upon his death heritage tax (IHT) on a total of £900,000? Is it best for her to put her name on the deeds now?
Tanya Jefferies from This is Money replies: Questions about house deeds and whose name should be on them are quite common among our readers.
We asked a lawyer who knows this area of law well to answer you, and she explains what your girlfriend needs to check and do now regarding the shared ownership of her parents’ property.
House deeds: how important is it to have your name on them if you inherit part of a property (Stock Image)
Regarding IHT, we have a guide here, but anyone who has total assets at their death near or above the amounts below should consider whether their estate may be liable.
IHT is charged at 40 per cent above the thresholds, starting at £325,000 per person, but rising to £500,000 if you leave a house to direct descendants.
If you have a spouse or registered partner, they are exempt from IHT after the death of the first partner.
They also inherit the above thresholds, so after the death of the second partner these double to £650,000, or £1 million if you have a property that you can leave to your children, grandchildren or their descendants.
Jennifer Charlton: It is important in this case that the house was owned by the parents as ‘joint tenants’ and not as ‘joint tenants’
Jennifer Charlton, partner in the private client team at Clarke Willmott, replies: To answer this question correctly, ask your girlfriend first check the title of the property to understand how it was owned by her parents.
Importantly, the property was owned by them as ‘tenants in common’ and not as ‘tenants in common’.
When owners are tenants in common, they can split the property into several shares – often but not always 50/50 – and leave them to someone else instead of the other owner.
But when property owners are joint tenants and one dies, the other becomes the sole owner, regardless of what is in a will.
If your girlfriend’s parents were tenants in common, this means in practice that there will be a restriction on ownership of the property, preventing its sale by only one of the owners.
Even if your friend’s mother’s name is now removed from the title, that restriction would still be in effect after her death, protecting her share of the property.
If it turns out that the property was owned by joint tenants and there is no restriction on title, the gift of the mother’s share of the property to your friend in her will would have been ineffective.
Instead, the mother’s share would have automatically passed to your girlfriend’s father as surviving joint tenant, outside the terms of the will.
If you want your share of a jointly owned property to pass to someone other than the remaining co-owner(s), it is important that you break the joint tenancy agreement so that you become owners of the property as joint tenants.
You can then leave your share of the estate according to the provisions of your will or the rules of the will.
However, you can also switch to ‘joint tenants’ after the death of one partner and your girlfriend and her father can explore this if necessary.
What did the will say?
If the property was owned jointly by tenants, it is important to review the terms of the will to confirm that the gift of the mother’s share of the property was effective and free from trusts that could affect how the property should be managed.
Based on the fact that the property was owned by your girlfriend’s parents as tenants in common and that the gift in the will was effective, your girlfriend has an advantage in the property.
What about IHT?
Broadly speaking, IHT is charged on the underlying economic interest in an asset and not on the legal ownership.
Therefore, the IHT liability on the death of the father is only calculated on the basis of the part of the assets in which he has an economic interest.
It makes no difference to that IHT position that your girlfriend’s name does not appear on the legal title because, regardless of legal ownership, she still has an economic interest in that property.
Should the legal title be in both names?
Regardless of the IHT position, it is best practice to make the legal title reflect the underlying economic interests wherever possible and this would give your girlfriend protection over her interest in the property.
This can be achieved by her father transferring legal ownership of the property into both their names, either as tenants in common or as tenants in common, making your girlfriend a co-legal owner.
Your girlfriend might consider it too introducing a restriction on the title of the property which confirms to interested third parties, such as a potential buyer or lender, that it has an economic interest in the property.
If your girlfriend’s name were added to the legal title, it would mean that her father would not be able to deal with the property without her knowledge, as the daughter would also have to sign any documentation related to the property, such as a sale or a new mortgage.
The restrictions are flexible in terms of the control they give the beneficial owners, but at the very least your girlfriend should be notified of any changes to the property, and ideally she should specifically consent to such changes.
