It can often be the case that a residue clause whether on purpose or inadvertently will have the consequence that the residue is left jointly between beneficiaries rather than as tenants in common. This will occur principally where there are no words of severance in the residue clause. Words of severance being words like “as tenants in common”, “between”, “equally”, “in equal share” and “share and share alike”.

Where a residue has been left as a joint tenancy and the residuary beneficiaries are not happy about this, then the only option is to break up the joint tenancy by deed. This presents two problems, one tax related and one legal.

On the tax front, the break up of the joint tenancy will have to be done by deed and this creates the usual range of capital taxes applicable on transfers of real or personal property. Capital gains will arise if there has been an uplift in value of the property from date of death to the time of the breaking up of the joint tenancy. (However, it is arguable the the transfer is not a disposal for CGT, as it only changes the legal basis by which the asset is held). Gift tax should not normally arise, because, unless there are new parties being introduced into the tenancy, there should be no increase in assets between the parties. All that is changing is the nature of their ownership. Further, there may stamp duty implications, however, there is an exemption for stamp duty under s. 30 (5) of the Stamp Duties Consolidation Act 1999 for voluntary conveyances under which no beneficial interest passes in the property conveyed or transferred.

However, there is a second issue. A significant hurdle with converting a joint tenancy to a tenancy in common is s. 30 of the Land and Conveyancing Law Reform Act 2009 which provides that any transfer of a joint tenancy without the prior consent in writing of all the joint tenants is “void both at law and equity”. In other words, all parties must join in writing the conveyance or transfer. This obviously creates difficulties where there is a dispute or parties to the joint tenancy lack capacity or are under 18. Thankfully there is a method to come around the severity of the rule through s. 31 of the 2009 Act. Under s. 31 you can apply for an order dispensing with consent. Further, the Circuit Court has concurrent jurisdiction with the High Court in these cases. It is an order dispensing consent where consent is being “unreasonably withheld”.

Some clients like the concept of jointly held residues as they like the idea of property staying within the one unit and not going outside the family. However, they are generally problematic and should be avoided.

Hope this helps and remember if you have any probate, will drafting or capacity queries, please do not hesistate to contact me on ckelly@hcalaw.ie or through the query service on the site.