The usual setup is a husband and wife. When one dies, the whole value of the house counts towards Inheritance Tax; however, married couples (and now, those in civil partnerships)are not liable to pay inheritance tax on transfers between each other. So there would be nothing to pay at that time.
The problem arises when the surviving partner dies. At that time, the whole value of the home counts as part of their estate. This can leave it liable to IHT.
In essence the first partner has wasted their IHT allowance.
One solution is tenancy in common. In this, each owner of the property owns a portion of it (usually, it is two people, each with 50%). They are then free to dispose of it as they wish. This means each partner could leave their half to say a child. Essentially, this means that only the value of the part they own falls into their estate. This means you get two bites of the IHT "cherry" in that each partner has only half the value of the home, not the full value, to worry about and can make full use of their allowance (called the "zero rate band").
However, as rules have now changed so that if a partner does not use the full IHT "allowance" when they die, it passes to the survivor. Essentially, a married couple share their allowance. So if a husband leaves property to his wife, that is always exempt, therefore, that part of his allowance is not used up, and is added to his wife's allowance when she dies. If he leaves things to other people, that will use up part or all of his allowance, only the remainder of it (if any) is left to his wife.
It is to specifically deal with the problem of couples who own joint properties who had not undertaken IHT planning.
Of course, there are downsides, as each "tenant in common" can do what they wish with their share.
