In England and Wales, most couples own their property as joint tenants, often without fully understanding the implications of this arrangement.

Joint tenancy seems straightforward: when one owner dies, ownership of the property automatically transfers to the surviving partner.

While this approach simplifies administration, it can lead to significant complications, especially if care becomes necessary later in life.

Under current rules, when both partners are alive and one needs care, the local government cannot consider the property’s value in their financial assessments for care contributions.

They only assess the individual’s personal savings and investments, along with half of any jointly owned savings, etc.

The current upper threshold for savings (2023-2024) is £23,250; holdings above this amount require the individual to fully fund their own care.

As savings decrease below this threshold, care costs become means-tested, with the individual contributing less until their savings drop below £14,250, at which point the state covers the cost.

The Challenge

Challenges arise if both partners require care or if one has already passed away, leaving the survivor with full ownership of the property.

In these cases, authorities consider the entire value of the property and any other assets when calculating care contributions.

This could deplete all savings and the value of the house down to the last £14,200, severely impacting the inheritance and leaving little after funeral and other expenses.

To mitigate this risk, couples can divide their property into equal shares and update their wills to include protective measures for the surviving partner.

Upon the first partner’s death, they pass their share of the property in trust to the next generation.

This share remains inaccessible until after the death of the second partner, incorporating several adaptable and robust aspects of estate planning.

This method not only protects the asset but also provides flexibility and peace of mind for the future.

What is Severance of Tenancy?

For many of us in England and Wales, our home is not just our ‘castle’ but also our most significant asset.

To protect this asset, making informed legal decisions is crucial, one of which is the Severance of Tenancy.

Severance of Tenancy allows joint property owners to change their joint tenancy into a tenancy in common.

This change means that instead of owning the property jointly, with the survivor assuming sole ownership after the first owner dies, each party holds an individual share.

How Does Severance of Tenancy Work?

The process begins when one or more owners decide to sever the joint tenancy.

This typically requires a written notice of severance.

The owners must document this change properly and ideally register it with the Land Registry.

This documentation ensures legal recognition of each owner’s share and its management or transfer according to their last will.

At Beacon Advice, our advisers are prepared to handle this for you.

How to Serve Notice of Severance of Tenancy?

Serving a Notice of Severance involves drafting a formal declaration that specifies the intent to sever the joint tenancy.

All owners should sign the notice, though it is possible for one owner to serve the notice on the others.

It is crucial to draft and deliver this notice correctly; therefore, seeking legal advice is highly recommended.

Once signed, you should send the notice to all other joint owners and file it with the relevant legal bodies.

Once again, Beacon Advice advisers can manage all of these steps for you.

How Much Does Severance of Tenancy Cost?

The cost of severing a tenancy varies depending on legal fees and potential registration fees.

Typically, the expenses involve drafting the notice and registering the change in ownership status.

While these costs are relatively modest, the real value lies in securing professional advice to ensure the severance is executed correctly, avoiding any future disputes.

A set of couples’ Wills including the Severance of Tenancy and the Lifetime Interest in Property Trust wording currently costs between £700-850.

The final figure will be confirmed by your consultant once they fully understand your needs and circumstances.

See our price guide – Pricing – Beacon Advice

A Personal Insight into the Benefits of Estate Planning

Let’s consider a personal story, my own, which highlights the benefits of proactive estate planning.

Over ten years ago, my parents wisely decided to split their property ownership and update their Wills, setting up a framework for their future care needs.

When my mother was diagnosed with dementia, the Lasting Power of Attorney documents they had arranged became invaluable.

Today, we are reassured that half of our family home is protected, thanks to their early decisions.

This example underscores the importance of timely estate planning and how it can provide peace of mind during challenging times.

Frequently Asked Questions

Can Severance of Tenancy affect my rights to live in my home?

Severing a joint tenancy does not affect your right to live in your home.

Each owner retains an equal right to the use and enjoyment of the property.

Is there a risk of severance being seen as deprivation of assets?

Owning a house as Tenants in Common is a perfectly normal and legitimate method of owning your property.

If done properly and well before any need for care is anticipated, it is unlikely to be seen as deprivation of assets.

However, timing and intent are crucial factors, and professional advice is always recommended.

What happens if circumstances change after severing a tenancy?

Tenancy in common offers flexibility.

Shares of the property owned can be restructured or the property sold, provided that all owners agree.