Q&As

X and Y purchased a property as a beneficial joint tenancy and signed a declaration of trust stating that X held 75% of the property and Y held 25%, with Y’s 25% share passing to X upon Y’s death. X paid 100% of the mortgage and Y was the sole occupant of the property. Y died and her estate is insolvent with no bankruptcy petition having been brought. Can the executors pay the creditors off in proportion to what they are owed out of the cash available in the estate, or will the creditors also have recourse to Y’s 25% share of the property? If the creditors can claim against 25% of the property, can X settle the debts herself to avoid selling the property?

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Produced in partnership with Helen Galley of XXIV Old Buildings
Published on LexisPSL on 23/12/2015

The following Private Client Q&A produced in partnership with Helen Galley of XXIV Old Buildings provides comprehensive and up to date legal information covering:

  • X and Y purchased a property as a beneficial joint tenancy and signed a declaration of trust stating that X held 75% of the property and Y held 25%, with Y’s 25% share passing to X upon Y’s death. X paid 100% of the mortgage and Y was the sole occupant of the property. Y died and her estate is insolvent with no bankruptcy petition having been brought. Can the executors pay the creditors off in proportion to what they are owed out of the cash available in the estate, or will the creditors also have recourse to Y’s 25% share of the property? If the creditors can claim against 25% of the property, can X settle the debts herself to avoid selling the property?
  • Severing a beneficial joint tenancy
  • Transactions at an undervalue under section 339 of the Insolvency Act 1986 (IA 1986, s 339)

X and Y purchased a property as a beneficial joint tenancy and signed a declaration of trust stating that X held 75% of the property and Y held 25%, with Y’s 25% share passing to X upon Y’s death. X paid 100% of the mortgage and Y was the sole occupant of the property. Y died and her estate is insolvent with no bankruptcy petition having been brought. Can the executors pay the creditors off in proportion to what they are owed out of the cash available in the estate, or will the creditors also have recourse to Y’s 25% share of the property? If the creditors can claim against 25% of the property, can X settle the debts herself to avoid selling the property?

Had the deceased (Y) died before the execution of the declaration of trust or without the joint tenancy otherwise being severed, Y’s interest would have passed to X by operation of law and no part of Y’s interest would have fallen into her estate or been available to satisfy her creditors.

Severing a beneficial joint tenancy

The effect of the declaration of trust which was executed later, ie after the purchase, was to sever the joint tenancy. A straightforward notice of severance served by one party on the other would sever the beneficial joint tenancy,

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