This week, we’re beginning a two-part dive into the nitty-gritty details of deeds. Strategically titling Real Property (“the land, everything that is permanently attached to the land, and all of the rights of ownership, including the right to possess, sell, lease, and enjoy the land,” according to Investopedia) is a huge part of Estate Planning. With a knowledgeable attorney’s help, you can save your family the headache of probating your house, protect the property from Medicaid Estate Recovery, and even save your heirs from paying thousands of dollars in capital gains taxes. A little education can go a long way in ensuring your home is owned in the way that works best for you!
If you’re purchasing a property with someone else, there are three main types of concurrent ownership, where “two or more people own property together, with neither person having exclusive use and possession of any specific part of the property,” in the words of attorneys Ward and Smith. Which type is best for you depends on who you own the property with and why you own it.
Tenants in Common
If you purchase a property with someone other than your spouse, it will generally be as Tenants in Common. This means that all involved individuals own the property with undivided interest and full right of enjoyment to the entire property. Every owner also retains the right to sell or gift their share of the property. The undivided interest can be in equal or unequal amounts- you and your fiancé would probably decide to each have 50% ownership, but if purchasing the property with a friend or business partner, one may have 70% undivided interest and the other 30%, for example.
Tenants in Common is considered the form of joint ownership with the least limitations and can be used whenever two or more unmarried people want to own a property together. There are several considerations to note, however. Every owner is financially responsible for the property, obligated to pay property taxes as well as liable for repairs and upkeep. No single owner can make decisions about the use or disposition of the property- if disputes arise, any one of the owners can petition the court for a partition of the property.
With Tenants in Common, when one owner dies their interest in the property will either go to their beneficiaries as outlined in their Will or as determined by intestate succession through probate. Even if the original owners were in complete agreement about the property, their successors may see things differently. To avoid the potential pitfalls of inherited shared property, some concurrent owners prefer to own their property as Joint Tenancy with the Right of Survivorship, or JTWROS.
Joint Tenancy With Right of Survivorship
Joint Tenancy with the Right of Survivorship has one main distinction from Tenant in Common. As its name implies, JTWROS is known as the “last one standing” deed. When one of the owners passes, their share is distributed to the remaining owners. This Right of Survivorship even overrides any Wills or intestate laws. Unlike Tenants in Common, JTWROS isn’t implied in a deed—it must be clearly stated.
Imagine I owned a property with my father, for instance, as Joint Tenancy with Right of Survivorship. If my father predeceased me, I would automatically and immediately inherit his interest in the house, becoming its sole owner and avoiding the probate process. This is where the Survivorship terminology comes in—in the words of Investopedia’s article, “each tenant has an equal right to the account’s assets and is afforded survivorship rights if the other account holder dies.”
Unlike with Tenants in Common, JTWROS can only be established if the owners have equal shares in the property and if they acquire the property at the same time.
Tenancy by the Entirety
The final general type of concurrent ownership in North Carolina is known as Tenancy by the Entirety. This type of ownership is only possible for spouses and acts as “early common law’s version of social security,” as described in Ward and Smith’s 2011 article. This is because Tenancy by the Entirety protects the property from liens or judgements against either spouse, excepting only for federal tax liens. When a married couple purchases a property, Tenancy by the Entirety is assumed unless otherwise stated on the instrument.
Each of these types of concurrent ownership have their specific advantages and disadvantages. To fully explore the possibilities and determine the best option for your situation, schedule a Deed Consultation with Susan Hunt Law. And stay tuned for Part Two, where we’ll discuss Life Estate Deeds and other property strategies!