According to Halifax, the average home in Britain is worth around £200,000 which is a substantial sum especially when it comes to probate. Whoever you leave your home to is likely to be the biggest beneficiary in your will. Your home can be worth enough to secure your family’s future for life. At the very least, you can leave your loved ones with a roof over their head.
However, leaving your home through a will is a lot more than simply signing a piece of paper. You need to consider how different types of ownership can impact your bequest. There are tactics you can use in order to properly leave your property in the will, as well as ways to make significant savings on tax.
Mortgage Lenders
In most cases across Britain, homes are owned with a mortgage – a loan from the bank or building society. If you fail to keep up repayments, the lender may repossess your home. There is a technicality however, you cannot repossess something that was not possessed in the first place. To confirm this point, many mortgage lenders will hold on to the title deeds until the loan has been repaid fully. If you die still owing money on your house, the mortgage lender has first call on your home.
Your mortgage lender won’t demand the cash as soon as you die: they understand that it is a harrowing time for your family and are happy to let them sort out their affairs before they pay the outstanding debt. The executors or administrators of your estate will contact the mortgage lender to let them know what’s happened and discuss when payment will be made.
If the property is owned on a joint basis, then the other tenant is liable for any outstanding mortgage. With tenants in common, the beneficiary is liable for any mortgage on the percentage of the property owned by the deceased. The beneficiary usually has two options: Either pay off the deceased’s percentage of the mortgage, or apply to take out a new mortgage to cover the debt.
Many people buy life insurance, which pay a set sum on death, so that the mortgage is paid off.
Word of warning, the mortgage repayments must be met or else the lender may ask the Courts for the right to repossess the property and sell it at auction to repay the outstanding balance on the mortgage. In some instances, a mortgage provider checks the credit record of the beneficiary before allowing the mortgage to be transferred.
If you’ve taken out a second mortgage on your home, the amount borrowed has to be repaid on your death. But a second mortgage is deemed a second charge on your home, which means the second mortgage lender gets their money only after the main mortgage lender.
Ownership and Bequests:
Sole Tenancy
If you are the sole tenant, you personally own 100% of the property (not forgetting the mortgage lender of course). This however, does not meant hat you can leave your home to whoever you want.
If you choose not to leave your home to your spouse or children, they can ask the courts to overturn your bequest. Under the Inheritance Act 1975, the Court is likely to overturn your decision and allow them to inherit. This act, in effect protects the people that rely on you from becoming destitute or homeless as a result of the terms of your will.
In Scotland, there is no equivalent provision written in law. However, in Scotland, the spouse and children of the deceased are allowed to claim temporary ailment and continuing ailment from the estate (ailment is the Scottish legal equivalent of maintenance).
For live-in partners, the executors or the court can still deem that they should be able to stay in your home after your death, if only temporarily until they find somewhere else to live. The court will make any such decision based on how much the person making the request depended for financial support on the deceased.
If you live alone, are unmarried, and don’t have children, as sole tenant you can leave your house to whomever you want.
Beneficial Joint Tenancy
Beneficial joint tenancy means that you own the home jointly with someone else, usually a spouse or partner. When you die your share of the property automatically passes to the person who owns it with you. The surviving joint tenant becomes a sole tenant and they can dispose of the home as they wish.
Joint tenancy is a painless way of leaving your home. Because joint tenancy rules take precedence, it means that you don’t even have to include your home in the will. Having said that, it never hurts to make sure your wishes are crystal clear and state that the beneficial joint tenant is to inherit.
The surviving joint tenant has the legal authority to decide who can remain living in the house. If your spouse is the joint tenant and remarries, the new partner may become the new joint tenant. If your spouse dies, the person they remarried takes possession of the home and can force your children to leave. These situations are more common than you think!
The right of the surviving joint tenant is considered by law to be more important than any rights you grant a beneficiary in a will.
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