Posted on May 18, 2017 in Personal Injury by Graeme Dickson
In Scotland, where two or more people purchase a property together, they should be faced with the decision of whether to include a so-called “Survivorship Destination” or not. It is surprising how many property owners do not know how their title and interest in the property is held.
Title can be held with a Survivorship Destination or in “pro indiviso” shares. If title is held “jointly between you and X, and to the survivor”, your one half share of the property automatically transfers to the named survivor upon first death. Where title is held pro indiviso, each half of the property is dealt with by the individual’s Will, or (where there is no Will), under the law regulating intestate succession.
As mentioned, where a title contains a Survivorship Destination, either party’s share, should the first of them die, will pass automatically to the survivor immediately upon death of the first party. There is no requirement for any other legal process to transfer the property and as such no additional costs associated with same.
It is relatively common for a husband and wife or unmarried couple to purchase a property in joint names with a survivorship destination. The inclusion of a Survivorship Destination provides security for the surviving spouse or partner as it cannot be overruled by a Will, even where the Will is written years after the purchase of the property. This is especially reassuring for property owners who are not married and therefore do not have the same legal protections and rights which a spouse has automatically.
Despite the advantages of automatic transfer of the property, Survivorship Destinations are not appropriate in all circumstances. The existence of a destination in the title can have an adverse effect on IHT and care home cost planning, particularly if one or the other spouse/partner becomes incapacitated and revocation of the Survivorship Destination becomes impossible. Additionally, it should be noted that a Survivorship Destination only deals with the property on first death and does not make any provision for what should happen to the property on second death. As such, care should be taken when including such a provision in the title and, where it is already in place, consideration should be given to its removal (a so called “evacuation of the survivorship”) where appropriate.
Pro indiviso shares
Owning the property pro indiviso provides each of the title holders with more flexibility with regard to what happens with the property upon their death. You may still choose to pass your share of the property to the surviving proprietor by provision in your Will. However, there may be benefits to dealing with the property differently.
Holding title to your property in pro indiviso shares can help protect your estate from possible future care home costs. Arguably, the least aggressive way of ensuring there is always some inheritance to pass on to family or friends is to make provision in your Will for your share of the family home to pass to family on death either outright or through a Trust. This means that on first death, the deceased’s one half share of the property will pass to the beneficiary(ies) of choice who will then own the one half share of the property. The survivor continues to own their own one half share. Therefore, if the survivor ends up in care having to pay for their care, only half of the property will be considered by the council when calculating those costs. The second half of the property is owned by the beneficiaries and will not be used to pay for the care home. However, it is important you consider the risks of transferring assets to your family members whilst you still require the use of the assets.
Which option is best?
Both Survivorship Destinations and pro indiviso titles have their benefits, and it really depends on the specific cicumstances as to which is more suited to a person’s needs and aims. If you own your property jointly you should find out how your title is held and determine whether this reflects your true wishes. A solicitor would be able to confirm how title is held by looking at the Deed in your favour. In order to evacuate a survivorship destination, you require the permission and signature of both owners of the property. As such, if you are wanting to protect the family home from possible future care homes, it is important to do this sooner rather than later.
In either case, it is important that you have a Will in place to ensure that your property and any other assets pass to beneficiaries of your choice. Even where you have a survivorship destination, this does not make provision for what happens to the property on second death and as such it is important to express your wishes. If there is no Will in place, your assets will be dealt with by the laws of intestacy and this could mean that your assets are inherited by people you would never have chosen or would specifically wish to disinherit.
If you already have Wills in place, make sure you are reviewing these periodically to ensure that they still reflect your current circumstances. If anything significant has altered in terms of your personal circumstances or relationships, you should take advice. If you require any guidance at all on these issues, would like to discuss them further with one of our solicitors, or if you wish to review your titles or current Wills please contact the Private Client team on 01382 229111.
If you have questions about property Titles in a Will, or if you have any questions about drafting a Will please contact Graeme Dickson in our Private Client team on 01334 477107 or by email at email@example.com or contact a member of the Private Client team.