Jointly Owned Assets and Assets Held on Constructive Trust
| Author | Nasreen Pearce |
| Pages | 169-180 |
Chapter 12
Jointly Owned Assets and Assets Held on Constructive Trust
12.1 JOINTLY OWNED ASSETS
12.1.1 Introduction
Any reference to joint property or jointly owned assets includes a beneficial interest in both real property and all other property, such as shares and bank accounts. Jointly owned property may raise issues relating to ownership, the extent of the deceased’s and the third party’s interest in the property and, consequently, whether the deceased was free to dispose of the property or his/ her interest in it in his/her will and whether it forms part of his/her estate. It follows, therefore, that how the beneficial ownership passes will depend on how the assets were held.
Where real property is held in joint names, the parties’ interest in the property and how the property passes on death will depend on whether their respective interest was identified by deed, declaration of trust or otherwise, when the property was acquired and whether it was transferred into their joint names as joint tenants or tenants in common. If the property was transferred and held by them as joint tenants, on the first death, the beneficial interest in the property will automatically pass by survivorship to the survivor, unless it can be established that the joint tenancy was severed during the lifetime of the deceased. Where the joint tenancy is severed, the deceased and the third party will hold the property thereafter as tenants in common and each of them will be free to dispose of their respective beneficial interest in the property by will or it will pass in accordance with the rules of intestacy if either or both die intestate.
In the case of property held by the deceased and a third party as tenants in common, each will not necessarily hold an equal beneficial interest in the property. The interest each will have in the property will depend on what was agreed between them. Their respective beneficial interest will pass under their will or intestacy.
170 A Practitioner’s Guide to Probate Disputes
12.1.2 Property held as joint tenants
Where property is held in joint names, it is important to ascertain whether the property is held by the deceased and the third party as joint tenants or tenants in common. If the property is held by them as joint tenants, the presumption is that the beneficial entitlement of each follows the title and they hold the property jointly in equal shares. If this is challenged, it is for the person who seeks to claim that the beneficial interest is different from that shown on the title deeds to establish his/her claim. Where bank or other accounts are held jointly in the name of the deceased and a third party, for example the deceased and his/her daughter, issues may be raised regarding whether the deceased alone was entitled to the monies in the account or whether it was intended that both the deceased and the third party were entitled to it. Where the circumstances indicate that the account was held in joint names for convenience, it will form part of the estate of the deceased. In deciding the issue, the court will need to examine the arrangements between the parties and the reason and purpose for which it was set up, to what extent the money was available to the third party, what the parties intended and whether the intention was for the deceased only to have sole rights and control of the use of the money. If it is contended that it was not, it will be for the party who asserts this to establish that it was not. Drakeford v Cotton and Another [2012] EWHC 1414 (Ch) provides a good example. In that case, following a lottery win, a couple made mirror wills leaving their property to each other and then to their three children, L, M and R, in equal shares. After her husband’s death, the wife transferred two of her accounts into the joint names of herself and her daughter,
M. About 4 months later, L, who was estranged from her family, apologised to her mother and accepted that her behaviour towards her mother had been hurtful and had caused distress to her mother. Following this contrition, the mother made statements indicating that she intended to make an immediate gift of the money held in the joint accounts to M so that the full legal and beneficial ownership of the money held in the accounts passed to M by survivorship on the mother’s death. L claimed that the money formed part of the mother’s estate and passed under her will to the three children in equal shares. On the facts, the court held that the mother clearly indicated her intention that M should have the money, and that she formed a settled intention and expressed her intention and the agreement between them created a declaration of trust (see also Whitlock and Another v Moree [2017] UKPC 44). Similarly, where for example a parent transfers property into joint names of the parent and one of his/her children, it will be for the person who challenges that transfer to establish a contrary intention or that the transfer was made under undue influence or misrepresentation (see Brindley v Brindley [2018] EWHC 157 (Ch), where evidence from the lawyer who prepared the transfer confirmed that the mother was independently and properly advised of the legal consequences of a transfer into joint names and that she fully understood the consequences).
Similar issues may arise in the case of life insurance policies as to whether the interest that the deceased and the third party had in the policy was genuinely held by them as joint tenants or whether each had a sole right to the sum assured on death (see Holland v Murphy and Others [2003] EWCA Civ 1862, where it was held that the policy was held by the policyholders as joint tenants).
Where property is owned jointly by the deceased and another, the deceased may have taken steps to sever the joint tenancy. Whether steps taken to sever the joint tenancy will in fact have the effect of severing the joint tenancy will depend on the circumstances of the case and the actions taken to sever the tenancy.
12.1.3 Severance of joint tenancy
A joint tenancy may be severed by written notice, mutual agreement, a course of dealings between the parties or actions taken by one or both of them during or within proceedings or by court order. The effect of severance is that it removes the right of survivorship, and the deceased’s share in the property remains as part of his/her estate and does not automatically pass to the survivor as in the case of joint tenancy.
Severance will normally occur by written notice of severance in accordance with section 36(2) of the Law of Property Act 1925. Where written notice is not available, reliance may be placed on the nature and extent of any agreement reached between the parties and their intentions or their conduct during litigation.
12.1.3.1 Severance as a consequence of actions taken in proceedings
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