How you take title to real estate determines your present day rights to the property, and affects how the property will transfer upon the death of one owner. It is important that you know how you own property and consider rewording a new deed if the ownership should be changed. It is also important that you evaluate your personal circumstances, and your desired estate plan, when determining the appropriate real estate title, whether married or unmarried.
Real estate may be owned as Tenants by the Entirety, Joint Tenants, or Tenants in Common. To understand which real estate title option is best for you, it is helpful to understand how property is transferred upon the death of its owner.
Upon the death of a property owner, the legal procedure for transferring the assets of the decedent is called ‘probate’. The estate obtains a tax ID number, notifies all interested parties, such as next of kin and parties named in the will. If demanded by a beneficiary, the Court may require a detailed accounting and must approve expenditures. Assets may or may not become tied-up until the process is complete, although ½ of all accounts can be released to the estate, depending upon how title was taken. If property is jointly held, it does not have to go through probate before becoming available to the surviving spouse.
Real estate title options: Tenants by the Entirety, Joint Tenants, or Tenants in Common:
Tenancy by the Entirety – property ownership by husband and wife with equal rights of possession during their joint lives, and with the right of survivorship. When one dies, the other spouse owns the entire property. Occurs when husband and wife are married when they take title to the property, and the deed expressly states that they are “husband and wife.” Neither spouse may sever, alienate, or otherwise affect their interest in the tenancy by entirety during the marriage or upon separation without the written consent of both spouses. Each spouse owns 100% of the property. Creditors of one cannot reach the asset because the other owns 100%.
Joint Tenancy – property ownership by two or more persons, with the right of survivorship. When one person dies, the other owner owns the entire property.
Tenants in Common – property ownership by two or more persons, each of whom has a fractional interest in the property, with no right of survivorship. For example, if two people own property equally, as tenants in common, each person has a 50% interest in the property, which that person may transfer or sell. If tenants in common, and one owner dies, the other owner does not automatically own 100% of the property. Instead, the 50% interest in the property must go through the probate process, and will be given to whomever is the beneficiary of the property by will or, if no will, by statute.
Most married couples own property as tenants by the entirety, unless they have developed an estate plan which requires a different ownership structure. As tenants by the entirety, upon the death of one spouse, the property automatically passes to the surviving spouse, without the need to put the property through the probate process. The property passes “outside” of the decedent’s will. Therefore, this is often the most ideal way for married couples to own property if they do not have a will, and if their estate plan allows.
By comparison, most business properties are owned as tenants in common.
If two people are listed on a deed to real estate, and the type of ownership is not specified, and they are not married, they are presumed to be tenants in common, each owning a fraction. When a couple purchases a home prior to marriage, without designating joint tendency, they each own only a fraction, even if they later marry.
© Shanahan & Voigt, LLC 2014
BE ADVISED that these comments are not legal opinions and are not to be relied upon as legal advice. If you need legal advice, contact your county bar association; most of which have referral services.