Joint Tenancy and Tenancy-In-Common are practices that will simplify and answer the posed question.
Joint Tenancy: When title to real property is held in joint tenancy between two or more people, and one of the owners dies, the other owner(s) automatically own the deceased owner’s share. This is generally known as a right of survivorship. This right is only available to natural persons and not entities. This is commonly used with married couples or family members who want the survivor of them to own the property.
- Husband and Wife own a property in joint tenancy.
- Husband dies.
- Wife now owns the property.
- Brother, Sister, and Mom own a property in joint tenancy.
- Mom dies.
- Brother and Sister now own the property in joint tenancy.
The advantages of right of survivorship, is costs and delay of a probate are not required to transfer the property. Also, it is easy and inexpensive to set up. The disadvantage is there can be unexpected tax implications with this type of transfer, so check with your accountant or legal counsel before using this to avoid probate. Another disadvantages to this, is that all joint tenants must be equal owners in the property. Interest in joint tenancy can easily be destroyed without the knowledge of other joint tenant(s). This happens by the owner(s) deeding their interest to another person or by deeding it to themselves. This situation creates a tenancy-in-common.
A common way to achieve similar results, upon death of an owner, is through setting up an Estate Planning Trust, and having the Trust hold title to the property. This allows for a greater degree of flexibility and control as to what can or cannot be done with the property. When used appropriately this can also avoid some of the unexpected tax implications of holding title in joint tenancy.
Tenancy-In-Common: When Title to real property is held in tenancy-in-common between two or more people, each can leave his or her interest upon death to beneficiaries of their choosing. A Will is the document that the Courts will look to when conducting a probate to determine who the beneficiaries are that will receive the deceased owner’s interest in the property. If there is no Will, a probate must still be conducted, and the deceased owner’s interest will pass to their heirs through the state’s Intestacy Laws.
This is commonly used with people who want to both jointly own real property with others, but also want to specify who will receive their interest when they die.
- Brother and Sister own a property in tenancy-in-common.
- Brother dies.
- Brother’s ½ interest is now inherited by his beneficiaries (a probate must be conducted to accomplish this and Sister still owns her ½ interest.
- 60% Brother, 20% Sister, and 20% Mom own a property in tenancy-in-common.
- Mom dies.
- Mom’s 20% interest is now inherited by her beneficiaries (a probate must be conducted to accomplish this) and Brother still owns his 60% and Sister still owns her 20% interest.
An advantage of tenancy-in-common is that ownership can be divided into any number of equal or unequal interests. Each owner has a separate, legal title to his or her undivided interest. Another advantage is that each owner’s interest may be separately transferred. The disadvantages to this practice is that a probate, to determine the beneficiaries/heir, can be time consuming and pricey. Also, individual tenancy-in-common interest ban be freely sold without consent of other owners (unless there are agreements in writing to the contrary).
Please note that besides individuals, Trusts and other Entities may hold title in tenancy-in-common. Holding title in a Trust or other Entity may allow for a greater degree of flexibility and control, and can also avoid the time and expense of a probate.
Joint tenancy and tenancy-in-common describes how Title to real property can be held. For this and other information on Utah Title Companies, Utah Title & Escrow, or Title Insurance Quotes locate and contact your nearest Inwest Title office at www.inwesttitle.com.