Why Tenancy in Common Should Be the Default for Estate Planning

Why Tenancy in Common Should Be the Default for Estate Planning

Estate planning is an essential process that ensures your assets are protected and distributed according to your wishes after your death. One of the critical decisions in estate planning is the choice of property ownership. While joint tenancy is a common choice, Tenancy in Common (TIC) offers significant advantages that make it a preferable option for many individuals and families. This article explores why TIC should be considered the default option for estate planning.

Protection from Care Costs

One of the most significant benefits of Tenancy in Common is the protection it offers against care costs. When a property is held as TIC, each owner’s share is distinct and can be left to different beneficiaries. This structure ensures that the deceased’s share is protected from being assessed for the surviving spouse’s care costs. This is particularly important because care costs can deplete the estate significantly, leaving little for the intended beneficiaries.

Safeguarding Against Divorce Settlements

Another critical advantage of TIC is its ability to protect assets from divorce settlements. If your children or other beneficiaries face divorce proceedings, assets inherited through a TIC arrangement are less likely to be included in the divorce settlements. This ensures that the inheritance remains protected and used as intended, safeguarding your legacy.

Creditors and Bankruptcy Protection

TIC also provides protection against creditors and bankruptcy claims. When a property is held as TIC, the deceased person's share can be placed in a trust, shielding the inheritance from creditors and bankruptcy claims against the surviving spouse or other beneficiaries. This protection is crucial for preserving the estate for future generations.

Inheritance Tax Efficiency

Holding assets in a Flexible Family Trust created through TIC can also enhance inheritance tax efficiency. By doing so, the inheritance does not add to the beneficiaries’ estates, minimizing the impact on their Inheritance Tax (IHT) liabilities. This is particularly beneficial for estates nearing or exceeding the tax-free threshold, ensuring that more of the estate is preserved for the beneficiaries.

Marriage After Death (MAD) Protection

One of the often-overlooked risks in estate planning is the potential impact of the surviving spouse remarrying. A TIC arrangement allows the deceased’s share to be placed in a trust, safeguarding against the risk of the surviving spouse remarrying and potentially disinheriting the original heirs. This ensures that the intended beneficiaries are protected regardless of future marital changes.

Greater Flexibility and Control

TIC offers greater flexibility and control over the estate. Multiple trusts can be established through TIC, providing beneficiaries with control over their own trusts. Trustees also have options to manage assets effectively, considering future tax implications and personal circumstances. This flexibility is invaluable in ensuring that the estate is managed and distributed according to your wishes.

Conclusion

Tenancy in Common provides a robust framework for protecting your estate from various risks and ensuring that your assets are managed and distributed according to your wishes. By opting for TIC, you can safeguard your family's financial future and minimize potential legal and financial complications.

If you are considering your estate planning options, it is worth discussing the benefits of Tenancy in Common with your financial advisor or estate planner. This simple yet powerful choice can make a significant difference in protecting your legacy and providing for your loved ones.