A case under the Inheritance (Provision for Family and Dependants) Act 1975 highlights the importance of checking the ownership of joint property.
Under the Inheritance (Provision for Family and Dependants) Act 1975 (“the 1975 Act”), an application can be made to the Court if “reasonable financial provision” is not made for certain individuals under a Will. The individuals who can potentially bring a claim under the 1975 Act include the spouse and children of the deceased.
The 1975 Act allows the Court to make a wide range of orders against an estate, including orders against property held as joint tenants. What happens to a property on death depends on whether the property is owned as “joint tenants” or as “tenants in common”:
- Joint tenants: on death, the deceased's share of the property will pass by survivorship to the surviving co-owner automatically, and this will happen irrespective of the provisions in the deceased's Will.
- Tenants in common: each owner has their own distinct share of the property and there is no right of survivorship which means that on death, the deceased's share of the property will not automatically pass to the surviving co-owner. The deceased's share of the property will devolve in accordance with their Will or the intestacy rules.
Under Section 9 of the 1975 Act, the deceased's share of property held by the deceased and another as joint tenants can be included as part of the deceased's net estate for the purposes of a claim under the 1975 Act.
The recent High Court case of Beg v Beg looked at how an order can be made under the 1975 Act against such property.
Beg v Beg
In 1986, Mr Beg and his parents purchased a property in Southampton (“the Property”) under the Right to Buy scheme. In July 2009, following the death of his parents, Mr Beg transferred the Property into the joint names of himself and his two brothers. In April 2010, the Property was then transferred into the joint names of Mr Beg and one of his brothers. On both occasions, boxes on the Land Registry forms were ticked to confirm that the Property was owned by them as joint tenants.
Under Mr Beg's Will, his estate was to pass to his wife. Whilst the Will referred to a rental property owned by Mr Beg, there was no explicit reference to the Property in the Will.
Mr Beg died on 17 October 2019. At the time of his death, Mr Beg was living at the Property with his wife and their infant daughter. Under the rules of survivorship, Mr Beg's share of the Property passed to his brother, who applied to the Land Registry for Mr Beg's name to be removed from the title. On 10 January 2020, Mr Beg's brother transferred the Property into the names of himself and his surviving brother as tenants in common. The brothers then separately applied to the Court for possession of the Property on the basis that Mrs Beg was trespassing there.
Mrs Beg made an application under the 1975 Act for a determination as to whether Mr Beg had owned the Property as joint tenants or as tenants in common with his brother. In the event that he was found to have owned the Property as joint tenants, Mrs Beg applied for his 50% share of the Property to be included in his net estate and transferred to her. Although no independent valuation was provided for the Property, it was estimated to be worth anywhere between £206,000 and £275,000.
In relation to Mrs Beg's circumstances, she did not work and was receiving state benefits, she was also undergoing treatment for depression. Mr Beg owned a rental property, which was inherited by Mrs Beg on his death. There was an interest-only mortgage (totalling £78,000) outstanding on the rental property and Mrs Beg was reliant on the rental income.
The Court found that Mr Beg and his brother had owned the Property as joint tenants at the time of Mr Beg's death. By failing to ensure Mrs Beg had a home to live in, the Court found that Mr Beg's Will did not make reasonable provision for Mrs Beg and their child. Although Mrs Beg had inherited a rental property, she could not discharge the mortgage on the rental property from the remainder of Mr Beg's estate. In order to occupy the rental property, Mrs Beg would need to end the tenancy and therefore would lose the rental income which met the mortgage payments. As such, the Court ordered that £80,000 of Mr Beg's interest in the Property be included in his net estate (and therefore inherited by Mrs Beg). Mrs Beg was allowed to continue living in the Property until the sum of £80,000 had been paid to her by Mr Beg's brothers
Beg v Beg highlights the wide discretion available to the Court. An award under the 1975 Act does not have to be an “all or nothing” order. In Mrs Beg's case, the award was tailored to her circumstances.
It also emphasises the importance of ensuring that jointly owned property is held correctly, either as joint tenants or as tenants in common. It is usually straightforward to check the ownership of a property and it is important that this is done at the time of making a Will, as otherwise there could be unintended consequences.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.