In Pennsylvania, title to real estate (and most personal property) can be held by co-owners in various ways – tenants in common, as joint tenants with right of survivorship, as tenants by the entirety and as tenants in partnership. We are asked frequently what the differences are among these forms of ownership and which is best. Well, it all depends…
The most important distinctions among the various forms of co-ownership relate to what happens upon death of a co-owner and what happens in the event a judgment or lien is lodged against one co-owner but not all.
If two or more persons own property tenants in common, each can transfer his part interest during life and each can pass on his interest to his heirs upon death. Contrast this with the case of a joint tenancy with right of survivorship, where, upon death of a co-owner the remaining joint tenant automatically succeeds to the interest of the decedent by operation of law; the interest of the decedent does not pass to his or her heirs, and the survivor ends up owning the entire property.
If the co-owners are married to one another, they would typically hold title as tenants by the entirety – a unique form of ownership available only to married persons. In some ways, a tenancy by the entirety resembles a joint tenancy – the surviving spouse automatically succeeds to the interest of the other spouse upon death. Tenancy by the entirety has the added feature that liens and judgments against either individual spouse do not attach to entireties property. Only encumbrances arising out of joint marital obligations can attach. Contrast this with tenancy in common and joint tenancy, where liens against an individual co-owner can encumber that co-owner’s separate interest.
Tenants in partnership hold real estate as a partnership, which is a separate legal entity. Unlike a tenant in common or a joint tenant, a tenant in partnership cannot sell or encumber any share of the property on his own. Also, as a general matter, partnership property is not subject to the debts and obligations of any individual partner, but only to partnership obligations.
In summary, while there are similarities among the various forms of co-ownership, there are subtle and important differences. The manner in which title to property should be taken depends upon a careful evaluation of various factors and may involve estate planning issues, debtor-creditor issues, tax considerations and basic business considerations. Understanding the differences in the forms of co-ownership is critical to proper planning.
One other important note: in our experience, many individuals and institutions involved in the process of titling personal or real property (bank accounts, securities accounts, automobiles, real estate etc.) are not completely familiar with the rules of co-ownership or with the proper words to be used to create the desired form of ownership. Some account applications even fail to provide all of the alternatives noted above, simply providing a choice of tenancy in common and joint tenancy. If your desire is to create a tenancy by the entirety, insist that your account be so designated on the application or signature card. Don’t assume that the bank representative or title clerk knows best. This is one area which is fraught with mistakes and deserves your close attention.
The most important distinctions among the various forms of co-ownership relate to what happens upon death of a co-owner and what happens in the event a judgment or lien is lodged against one co-owner but not all.
If two or more persons own property tenants in common, each can transfer his part interest during life and each can pass on his interest to his heirs upon death. Contrast this with the case of a joint tenancy with right of survivorship, where, upon death of a co-owner the remaining joint tenant automatically succeeds to the interest of the decedent by operation of law; the interest of the decedent does not pass to his or her heirs, and the survivor ends up owning the entire property.
If the co-owners are married to one another, they would typically hold title as tenants by the entirety – a unique form of ownership available only to married persons. In some ways, a tenancy by the entirety resembles a joint tenancy – the surviving spouse automatically succeeds to the interest of the other spouse upon death. Tenancy by the entirety has the added feature that liens and judgments against either individual spouse do not attach to entireties property. Only encumbrances arising out of joint marital obligations can attach. Contrast this with tenancy in common and joint tenancy, where liens against an individual co-owner can encumber that co-owner’s separate interest.
Tenants in partnership hold real estate as a partnership, which is a separate legal entity. Unlike a tenant in common or a joint tenant, a tenant in partnership cannot sell or encumber any share of the property on his own. Also, as a general matter, partnership property is not subject to the debts and obligations of any individual partner, but only to partnership obligations.
In summary, while there are similarities among the various forms of co-ownership, there are subtle and important differences. The manner in which title to property should be taken depends upon a careful evaluation of various factors and may involve estate planning issues, debtor-creditor issues, tax considerations and basic business considerations. Understanding the differences in the forms of co-ownership is critical to proper planning.
One other important note: in our experience, many individuals and institutions involved in the process of titling personal or real property (bank accounts, securities accounts, automobiles, real estate etc.) are not completely familiar with the rules of co-ownership or with the proper words to be used to create the desired form of ownership. Some account applications even fail to provide all of the alternatives noted above, simply providing a choice of tenancy in common and joint tenancy. If your desire is to create a tenancy by the entirety, insist that your account be so designated on the application or signature card. Don’t assume that the bank representative or title clerk knows best. This is one area which is fraught with mistakes and deserves your close attention.
– Kevin Palmer