There are several forms of ownership for property, whether it is real estate or personal property, and how your property is owned impacts what happens to it when you pass away. It will also impact your estate planning tasks. Two forms of co-ownership in property are tenancy in common and joint tenancy, and it is important to know the difference, particularly when it comes to estate planning.
Tenancy in common involves undivided ownership interests. Joint tenancy is the other system of co-ownership in addition to tenancy in common and has been the more popular form of co-ownership. With joint tenancy, as with tenancy in common, two or more people own property together. Each has an undivided interest in the property. Each owner has the right to request a court order for partition and sale if he or she wants to terminate the arrangement, such as in the case of a divorce of a married couple. The major difference between joint tenancy and tenancy in common becomes clear at the death of one of the owners.
With joint tenancy, there is a right of survivorship that controls disposition. When property is held in joint tenancy and one of the owners dies, the property goes to the surviving owner. An ordinary will does not impact the disposition of property owned in joint tenancy at the death of the first joint tenant. When property is held in joint tenancy, in essence, there is a “built in” will operating on the death of the first joint tenant to pass away.
On the other hand, if that property was owned under a tenancy in common arrangement, when one owner dies, that person’s interest in the property goes to the heirs under state law if the person has no will. If the individual has a will, the deceased’s ownership interest passes under the will to the named beneficiaries. The heir or will beneficiary then owns the undivided interest in the property with the living co-owner.
There are benefits and drawbacks to each form of ownership. It is important to understand the consequences of the different types of property ownership, particularly when it comes to estate planning. Working with an estate planning attorney not only ensures you understand the terminology used, but it ensures that all aspects of your estate plan coordinate to meet your family’s needs.