Among the excitement of purchasing a property together, the question of how the ‘title’ to the property should be taken is often only given a quick thought.
Very little time is spent on considering what it means to include or not to include a ‘special destination’ in the title and the consequences this may have down the line.
What is ‘joint title ’?
When a person buys a property he/she takes ‘title’ to that property in their sole name. When two people fund a purchase together it is common to take the title in joint names (‘joint title’) . This can be equally (one half share each or 50/50) or it can be split to reflect the amount that each party has paid towards the purchase price.
Where title is taken jointly, should either party die, their share would remain to be dealt with either by the terms of the deceased person’s Will or if they did not have a Will by the laws of intestate succession ( the default rules that apply where there is no Will ) . Should the parties split up or divorce, then each party’s share could (subject to negotiation) be transferred to the other or the property is sold and the proceeds split in accordance with the ownership interests held.
‘Jointly and to the survivor’
The more historic option is to take title to a property ‘jointly and to the survivor’. This is done by adding an extra sentence into the disposition (the deed transferring a property from the sellers to the purchasers) which states that the property is being taken jointly between the purchasers and then to ‘the survivor of them’.
This is commonly called a ‘survivorship destination’ or a ‘special destination’ and means that should either party die, then their share in the property would automatically go to the surviving co-owner of the property.
Whilst this may seem like an easy /simple option to ensure that the property automatically goes to the other owner, it is something to be considered very carefully.
Advantages of a survivorship destination:
On the death of the first party, the property will be owned automatically by the surviving co-owner. Where this reflects the deceased’s Will and wishes, then this can be an easy way to ensure the property goes straight to the surviving co-owner without delay and without any expense of obtaining Confirmation (probate) or incurring any conveyancing expenses . It is an inexpensive way of ensuring that the co-owner takes title to the deceased’s share in the property.
Where there is no Will, it can also help to ensure that title to the property remains in the hands of the other owner, and of course if this was the intention then it can be a positive thing. The intestacy rules then deal with the deceased’s other assets.
Disadvantages of a survivorship destination:
It is a contractual commitment between both parties to the title and cannot be cancelled without both parties agreeing in writing to ‘evacuate’ or remove the clause. This involves drawing up another deed and having both parties sign it ... so additional costs.
If one party wants to remove the survivorship destination and the other does not, what happens? If the parties split and cannot agree their separation agreement, or the prompt sale of the property, there is a risk to both parties should either one die before matters are resolved. The unintended consequence could be that the surviving separated partner becomes the legal owner of the whole property by default.
A survivorship clause may not be helpful for tax planning purposes. We find a lot of home owners, particularly spouses, want to remove the survivorship clause from their title as part of their tax planning /retirement planning strategy.
Issues may also arise where one owner becomes resident in a care home, or no longer has the capacity to instruct that the title deeds are changed.
One size fits all?
Absolutely not! Having a survivorship clause in your title may cause significant legal and practical problems for you/your family further down the line. A ‘special destination‘ could turn out to be far from special and could contradict your Will or real wishes. Very careful and serious consideration should be given to how you take title to any property you are buying if you are not the sole owner.
If you are thinking of purchasing a property jointly and would like to discuss your options or you wish to review the current provisions of your title or Will, then please do not hesitate to contact TC Young’s Private Client team to find out more.