In real estate, joint tenancy refers to ownership by two or more people in a property where the shares are equal and undivided. People who choose joint tenancy are referred to as joint tenants on the title.
‘Tenant in common’ refers to a situation when ownership between two or more people is divided into certain shares. For example, A owns 80%, B owns 20%, or A owns 50% and B owns 50%. The total share held as tenants in common must equal 100%. People who choose tenants in common will be referred to as tenants in common with their respective share beside the name on the title.
Joint Tenancy
In joint tenancy, in case of a death, the property will be automatically inherited by the surviving person on title. A will is not required for the surviving owner to inherit the property. This is referred to as “right of survivorship.” This title ownership avoids the process of probate through court. On the sale of property, all net sale proceeds will be paid jointly to all owners. Joint tenancy is the most preferred way for spouses to hold title. It could also used by parent(s) and child(ren) as part of the estate planning.
Tenants in Common
Tenants in common, on the other hand, does not allow the title to be automatically transferred to the surviving title holder and requires a will to have the share in the property transferred to the desired person(s), called a beneficiary(ies). A person holding title as tenant in common must have a will and state in their will whom the share of the property will pass onto after the death. The share in the property that is held as tenant in common becomes part of the estate after the death of that person. This requires the process of probate through court.
Probate
Probate means applying to the court for its confirmation as to the validity of the will of the deceased and authorizing the person named in the will to act as the estate trustee. The will would state the name of the estate trustee, who will have the authority to manage the estate affairs and pass the deceased person’s share to the beneficiary after the probate of the will.
If a person dies without a will, it is referred to as intestacy, and the process of probate without a will takes place through the court, whereby the close relatives can apply to the court to gain authority to act as an estate trustee to manage the estate. On the sale of property, the net sale proceeds will be distributed according to the shares held as tenants in common.
Owning a property as joint tenants seems an easier way to hold title and estate planning, but it can pose risks if not thought out thoroughly. Tenancy in common has its cons as well. Knowing the type of tenancy you wish to adopt when purchasing a property is vital for your current and future estate planning.
If you require further guidance about joint tenancy and tenants in common, please do not hesitate to contact our real estate team. https://malickisanchezlaw.com/
