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If you own real property, such as a house or a vacation home, with someone else, who gets it if one of you dies? You might think the obvious answer would be “the surviving owner,” and you’d be right…but only under certain circumstances. The truth is that there are different ways to own property with people, and who takes the property interest of an owner who dies depends on the way the property is held. Here’s a brief rundown of some types of joint ownership, and what they mean for surviving owners.
Tenancy in Common
Tenancy in common is a type of ownership between two or more people or entities. Most of the time, ownership interests are equal, but they need not be. For instance, one person could own a 50% share of the property, and two others 25% each.
Let’s imagine that you and your three siblings inherited your parents’ vacation cottage as tenants in common with equal shares. Each of you would have an “undivided interest” in the property, meaning you each would be able to use the whole property, not just the percentage of it that was designated “yours.” That makes sense.
If one tenant in common dies, and property was held in their name alone, ownership rights go to their heirs or named beneficiaries.
Each of you also would have the freedom to sell or transfer your own interest in the property—and you wouldn’t need the permission of the other tenants in common. So if your brother loses his interest in the property in a poker game, you and your other siblings could find yourselves negotiating lake weekends with a complete stranger. If your sister doesn’t get around to paying her income taxes, her interest could eventually be levied by the IRS.
What happens to the property interest when one tenant in common dies? Rather than going automatically to the other tenants in common, if the deceased’s share of the property is held in their name alone, it would go to the deceased person’s heirs-at-law (if there is no estate plan) or to a stated beneficiary in a will or trust.
To further complicate matters, property other than real estate can be owned as tenants in common. This has an impact on who would be the heir-at-law. If the property is real estate, the law of the state where the property is located dictates who is an heir-at-law. If it’s a piece of personal property, like a car, the law of the state where the deceased resided at the time of death governs inheritance.
Joint Tenancy With Right of Survivorship
Now, let’s compare tenancy in common and joint tenancy with right of survivorship. Like tenancy in common, with joint tenancy, all tenants have the right to use the whole property. Another similarity is that there may be two or more tenants. But there are many differences between the two types of ownership.
If a joint tenant with right of survivorship dies, the other joint tenant(s) automatically receive the deceased’s share.
In joint tenancy with right of survivorship (JTWROS), all tenants have an equal interest in the property; one cannot own 25% with the other owning 75%, for instance. All interests must be created at the same time, and the deed must reflect the name of each owner, which is not true of tenancy in common. But perhaps the biggest difference is what happens on the death of an owner: their interest in the property goes directly to the other joint owner(s) outside of probate, regardless of what the deceased’s estate planning documents might say.
This can be a real advantage, as in the example of the vacation cottage above. Your parents probably intended the cottage to stay in the family. With JTWROS, you and your siblings would all be able to use the cottage during your lives, with the last surviving sibling taking full ownership. No probate administration would be needed with regard to the property.
However, JTWROS isn’t always the best option in every situation. Let’s say your spouse inherited , together with their brother, their parents’ house as joint tenants. Your spouse’s sibling lives across the country, and you and your spouse have always lived in the house. After thirty years of living there together with your spouse, maintaining it and paying the property taxes on it, your spouse dies. Who owns the house? Your brother-in-law. You have exactly zero legal right to the property. Your brother-in-law may be willing to rent it or sell it to you at a good price, but that’s up to him, not you.
You may not be able to control how you or your spouse inherit property, but you can control how you choose to hold it and leave it to others. The various forms of joint ownership have many implications, and it’s best to talk to an experienced estate planning and probate administration attorney to understand how your chosen form of ownership will affect your heirs.
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