While you might think it is easy to leave your house or flat to someone you love, bequeathing property is not always straightforward. So, how can you ensure that your home is passed on as you would like?
When someone dies and leaves behind a home, there are a few things that need to be considered, including the following:
Is there an outstanding mortgage?
If there is a mortgage, the beneficiary will inherit this along with the property and the lender may require the property to be sold to repay the debt. If the beneficiary is able to take on the repayments, they can try and arrange this with the lender, however it will be up to the lender to decide whether to approve this. It will effectively be dealt with in the same way as a remortgage, meaning an application for a mortgage will need to be made in the usual way. It will also be open to the beneficiary to approach a different lender.
In the meantime, the lender may agree to a payment holiday while matters are dealt with. It may be possible to remortgage for a longer period so that the repayments are smaller, or on an interest-only basis.
Did the deceased own the legal title to the property?
If the property is registered at HM Land Registry, their records will show who the owner is. If the property is not registered, then the title deeds will need to be located, including any transfer to the deceased, so that their legal ownership can be established.
How was the property owned?
If a property is jointly owned with someone else, the ownership will be in one of two ways:
A joint tenancy: This means that both of the owners own the whole property together and, should one of them die, the other owner automatically owns the property outright. This means that a property owned by way of a joint tenancy cannot be left to anyone in a Will.
Tenancy in common: This means that each owner owns a specified share in the property. They could own half each or the shares could be different, for example 75:25. When an owner dies, their share will pass to their beneficiaries in accordance with the terms of their Will or, if they have not made a Will, according to the Rules of Intestacy.
If you own a property as a joint tenant but wish to leave your share in your Will, it is possible to sever the joint tenancy so that you own the property as a tenant in common. Your legal adviser will be able to arrange the severance for you and register this at HM Land Registry.
Is the property freehold or leasehold?
If the property is freehold, then it is a fairly simple transaction to transfer it to a new owner. If the property is leasehold, this means that the owner is leasing the property from a freeholder for a specified number of years. The lease could include requirements for any sale or transfer to be notified to the freeholder.
Did the deceased make a Will?
If the deceased did not leave a Will, then there are a set of regulations known as the Rules of Intestacy that set out who will inherit their assets. This might well not be what you want to happen and it could be the case that some of your loved ones would not inherit anything from you. For example, a cohabiting partner would not receive anything under the Rules of Intestacy. To avoid this, you should make sure you have a valid Will in place.
If you leave your property to your spouse, there is a risk that it might not ultimately pass to your children, even if that was what you both intended. Your spouse could decide to leave their assets to someone else when the time comes, such as a new spouse. They could also end up having to sell the property and use the money to pay for care home fees or even potentially lose the money in a bad investment.
There is a way to avoid this while still giving your spouse the right to live in the property for as long as they want. This is done by giving them a life interest. It means that they will be able to stay in the property after your death or even sell it and buy a different property. Once they have left for good, the property will be sold and your share will pass to your choice of beneficiary, which could be your children.
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Our lawyers have extensive experience in working with clients to ensure their property is left to their choice of beneficiary in the most secure and tax-efficient way possible. We can explain how best to ensure your assets, including your home, are passed on to your loved ones in the way that you want.