When more than one person owns property they are referred to as “co-tenants”. How co-tenants own the property can vary – and can determine what happens to the property when one of them dies or when a creditor comes after the property to satisfy a debt. This article provides a simplified summary of the major issues.
If Bob and Susan own real estate as co-tenants, they might own it as “tenants in common”, as “joint tenants with right of survivorship”, or as “tenants by the entirety.” Depending on their circumstances they might wish to be careful which form of ownership they select.
Tenants in Common
If Bob and Susan own property as “tenants in common”, it means that they each own a half interest in the whole property (or some other percentage if specified in the deed or title document). This means that they are each entitled to use the whole property, and would share rent, profits and expenses on a 50-50 basis. Each could pass their half interest to their heirs by Will upon death. Unmarried co-tenants are presumed to hold title to real estate as tenants in common absent proof to the contrary.
Joint Tenants with Right of Survivorship
If Bob and Susan own real property as “joint tenants with right of survivorship”, it means that they each own a half interest in the whole property (like tenants in common), but upon the death of Bob or Susan, the survivor would become the sole owner of the property – no Will is necessary to accomplish this.
Tenants by the Entirety
If Bob and Susan are married and own property as “tenants by the entirety”, it means that the marital “unit” of Bob and Susan owns the property – neither has an individual interest in the property – and upon death of either Bob or Susan, the survivor would become the sole owner of the property (like joint tenants with survivorship). In addition, a creditor of one of the spouses could not take the property to satisfy a debt – only a joint creditor can do this with a “tenancy by the entirety.” Note that there is a presumption that married persons own their property as tenants by the entirety where they do not so specify in their title documents. They can overcome this by specifying one of the other forms of co-ownership.
Summary Comparison
In a tenancy in common, either co-tenant can pass their interest by Will or intestacy and either can convey their interest to a new co-tenant. Each co-tenant’s interest is subject to claims of individual creditors.
In a joint tenancy, death of a co-tenant automatically vests title to the decedent’s share in the other co-tenant, regardless of what the decedent’s Will might say. During life a joint tenant may convey their interest to a new co-tenant (which converts the joint tenancy to a tenancy in common without survivorship).
A tenancy by the entirety does not allow either spousal owner to convey their interest to a new co-tenant (unless the other spouse consents).
The rules on titling property apply not only to real estate, but also apply to bank accounts, investments and other personal property. The words you use when the property is acquired can have dramatic implications for future ownership – always consult with a qualified attorney to make sure that your title is structured properly. We would be happy to help in this regard.
– Kevin Palmer