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SURVIVORSHIP DESTINATION VERSUS PRO INDIVISO SHARES

What is a Survivorship Destination?
Where more than one party purchases a property in Scotland, the title can be held with what is called a “Survivorship Destination”. This means that on the death of either party, the deceased’s share of the property will pass automatically to the surviving owner. A Survivorship Clause will override the terms of either party’s Will, even if the Will is made after you purchase the property, as well as intestacy laws.

Pro Indiviso Shares
If you decide against including a Survivorship Destination in your title, a title can also be held in “pro indiviso” shares. This means that when either party dies, their share of the title will pass in accordance with the terms of their Will. The deceased party’s share of the property will not pass automatically to the other owner of the property.

Reasons For Reasons Against
The property will not pass through your estate. Survivorship Clauses take precedence over your Will provisions and the laws of intestacy. This ensures simplicity The Survivorship Destination cannot be revoked unilaterally. You and your co-owner must both agree to revoke the clause. This can become problematic if one party wishes to revoke the clause but the other refuses (or is unable to consent due to incapacity) to the revocation. This is in stark contrast with a Will, which can be drafted according to your own personal wishes and continually updated with relative ease.
Survivorship Destinations are especially useful for unmarried couples who are buying a property together. Cohabitants do not have any automatic entitlement to each other’s estate on death, but a Survivorship clause guarantees that a surviving partner automatically gains sole ownership of the property. Separation does not affect the Survivorship Clause.  It will remain unaffected by the separation of a married couple unless you formally divorce. So, despite a separation and you creating an updated Will, your share in a property could pass to an estranged spouse, even if they have not lived there for a long time.
It provides certainty. A Survivorship Clause offers certainty and security that ownership of your property will pass to your partner or co-owner regardless of whether you have a Will in place at the time of your death. It can render Trust provisions ineffective. The Survivorship Clause is problematic in the creation of trusts, as the clause may prevent a property from entering the trust.
The Survivorship Clause can be revoked. In the event of divorce, the clause is deemed to be automatically cancelled. Alternatively, co-owners can choose to revoke the clause by joint agreement (“Evacuation of a Survivorship Clause”). There are potential negative tax consequences. There can also be tax consequences and financial costs to an inappropriate Survivorship Destination. It is HMRC’s view that property passing under a Survivorship Destination on a death comes under remit of inheritance tax, and the liability for tax on any such property lies with the survivor. So, the Survivorship Destination could result in careful tax planning being negatively affected.
There will be fewer steps to administer a deceased’s estate. As the property passes automatically, there is no requirement for any other legal process to transfer the property and so, no additional cost associated with this. It is inflexible, especially for couples who have children from previous relationships that they wish to protect via their Will. A Survivorship Clause overrides a Will so it would not be possible to leave a share of the property to the child of a previous relationship.

Pro Indiviso Shares
If you decide against including a Survivorship Destination in your title, a title can also be held in “pro indiviso” shares. This means that when either party dies, their share of the title will pass in accordance with the terms of their Will or, if they have not made a Will, in accordance with intestacy rules. The deceased party’s share of the property will not pass automatically to the other owner of the property.

MHD Law’s Conveyancing team is always available to assist you with queries such as this. If you wish to discuss or obtain advice in relation to the above or the conveyancing process, please get in touch with our Conveyancing Team on 0131 555 0616 or edinburgh@mhdlaw.co.uk