Should I change my will to protect my house?

I am a widow and have joined forces with my divorced daughter to buy a house, which we will own 50/50 as tenants in common. I've made a will leaving everything to my daughter and then to my two grandchildren. My daughter has made a will leaving her share of the house to her two children, who have partners.

But I am worried about what could happen to me should my daughter die first. Is there anything I should be doing? I have put in £400,000 and she has put in £100,000. Felix Appelbe of Ambrose Appelbe Solicitors says it is not entirely clear if you have already bought the property, or whether you are only now considering a purchase. However, let's assume that the property has not yet been purchased and that your daughter's divorce has now been finalised, preventing her ex-husband from making any claim on her estate.

As tenants in common, if your daughter died before you, her share of the property would pass to her heirs under the terms of her will. This would mean that your daughter's share of the property would be inherited by her children and this could potentially leave you in a vulnerable position.

One would hope your grandchildren would allow you to live in the house for the rest of your life. But it could mean you find yourself living with either or both grandchildren and their partners. Or your grandchildren could force a sale of the property to realise their inheritance and their equitable share in the property.

Another danger is that the half share owned by your grandchildren could be used as security for their debts or the debts of their partners - which could place your home at risk. Finally, with grandchildren and potentially their partners as co-owners, you could be more vulnerable to their influence and at risk of making unwise decisions.

Owning the property as tenants in common therefore puts you in a less advantageous position than your daughter: if you were to die first, she would inherit your share of the property under the terms of your will and become sole owner of the property, whereas the converse is not the case.

To ensure that you would remain in your home, in the event of your daughter predeceasing you, I suggest that you instead purchase the property as joint tenants. Holding the property this way means that, on the death of either tenant, the property passes to the surviving tenant outside the terms of the will. As your grandchildren are eventual beneficiaries of both estates, this would provide you with the security that you are clearly seeking.

You should also consider the inheritance tax position. The total value of the property is £500,000, comprised of your £400,000 contribution and £100,000 from your daughter. The house is held on a 50/50 basis, so of the £400,000 you paid, £150,000 would be considered a potentially exempt transfer (PET) for inheritance tax purposes were you to live a further seven years after the purchase. If you died within seven years, this amount (or a proportion of it) would have to be added to the total value of your estate for inheritance tax purposes.

However, as a widow, it may be possible for you to make use of any balance of your husband's nil-rate band, if this was not used up when he died, to reduce any tax due.

This advice is specific to the facts in the questions posed. Neither the FT nor the contributors accept any liability for any direct or indirect loss arising from any reliance placed on replies.

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