Getting Back to Basics on Property Ownership

In a recent CII written exam, the property owned by a husband and wife was held as tenants in common rather than as joint tenants. The differences between the two could be tested in CF1, R01, R05, R06, J02, AF1 or AF5.

Let’s remind ourselves here of the detail:

Joint Tenants

Under a joint tenancy, if one of the joint owners dies, then their share of the property automatically passes to the surviving joint tenant. This is due to the ‘right of survivorship’.
This is usually how any joint life first death policy would be held so that on the first death of one of them, the sum assured would be paid to the survivor as the other joint tenant.
This is also the normal way for most homes to be held by a couple.

Tenants in Common

Under a tenancy in common arrangement, the situation is different. On the death of a tenant in common, the property does not revert automatically to the survivor. Instead, it passes to the deceased’s estate and is distributed according to their will, if they have one, or the laws of intestacy if they don’t. In addition, the percentage split in the share of the property does not have to be equal; different shares can be held by each.

Holding property as tenants in common can be useful for those that are unmarried, including friends who want to buy a property together, as well as those who have children from a previous marriage and want to ensure they benefit.

Exam Question

A question that has appeared in a CII exam tests joint life policies held as tenants in common. In reality, it is not often that a joint life first death policy would be held as tenants in common but should the question come up in an exam as to how the sum assured is distributed, what is the correct answer?

Here’s the question:

If a married couple owns a joint life first death policy as tenants in common and one of them dies, how is the sum assured distributed?

Answer:

Assuming they hold the policy in equal shares of 50/50, on the death of one of them half the sum assured would be paid to the survivor and half would be paid to the estate of the deceased.

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