It is easy to assume that every asset you own will pass in accordance with your will following your death. It is equally easy not to review the title deeds of your jointly-owned house in conjunction with your will and, specifically, determine whether or not there is a survivorship destination lurking. This, however, can have serious ramifications, particularly where a joint-owner of a house becomes incapacitated.
Where more than one party purchases a property in Scotland, the title will cater for the death of a joint-owner in one of two ways: pro indiviso shares or a survivorship destination. The former means that, on the death of one party, their share (usually a half) will simply fall within their estate, to be distributed in accordance with their will. For example, where a couple jointly own a house and the title dictates that it is held in pro indiviso shares, on the death of the first party, their half-share can be passed to the beneficiaries of their will.
What is a survivorship destination?
Particularly popular in dispositions drafted in the 1980s and 90s, survivorship destinations (or special destinations) are held by joint-owners "equally between them, and to the survivor of them". This clause transfers a deceased joint-owner's share of a property to the surviving joint-owner immediately on death.
This is not without its advantages and can even facilitate a more straightforward estate administration upon the death of a joint-owner. Naturally, it is often the case that a joint-owner wants the house to pass to their partner or spouse on their death and this allows that to happen without the need for a formal conveyance by the deceased party's executors. However, and crucially, a survivorship destination will take precedence over the terms of any will put in place by the deceased. As it is contract between the joint-owners, it can only be evacuated (removed) with the consent of both owners.
When could this be problematic?
To use an example, Kelly and Michelle co-own their home and there is a survivorship destination in the title and Kelly has to move to a residential care home. Should Michelle predecease Kelly, her share in the house will transfer to Kelly immediately upon her death. The entire property would then be within Kelly's estate, for example, for the purposes of assessing care home costs. This would be the case even where Michelle's will explicitly provided that their children were to inherit everything. In this example, that inheritance could be whittled away in care fees. If this situation became apparent before Michelle's death, but after the onset of Kelly's incapacity, it would be impossible to have the survivorship destination revoked, unless Kelly had a power of attorney in place.
In addition to the type of situation illustrated above, the inflexibility of survivorship destinations can also have adverse effects when it comes to matters such as inheritance tax planning, separation and insolvency.
What should I do?
The best starting point is to be armed with information as to the nature of your jointly-owned title. While easy to put off, it can all too quickly become too late to make any necessary changes. Checking the title deeds and considering evacuation of any survivorship destination found therein may be sensible. This would allow for any provisions in your will relating to your share of the property to function as you wish.