Do you own a property with a spouse, sibling or friend? What type of ownership do you have associated with that property? Do you know?
There are several different types of property ownership and they each serve a very different purpose. Here are the 3 most common types of property ownership:
Tenancy in Common: this type of concurrent ownership is used with two or more parties in which each party has a distinct, separately transferable interest. Let’s say you and your 3 siblings purchase a property together in Tenancy in Common and you each have your spouse or child as the beneficiary. When one sibling dies, his or her interest is given to his or her heirs. This is the weakest method of holding title as each separate interest can be subject to creditors or to be sold off by the owner to a new owner without consent of the other owners on title.
Joint Tenancy with Right of Survivorship: this form of ownership transfers ownership from one party to another upon death. Any two or more parties can enter into this type of ownership when they want to keep the ownership of a property between those parties. This is essentially the same as tenancy in common with the additional benefit of survivorship. As such, creditors can attach to interests and one owner can act to eliminate their joint tenancy by conveying the property to some other person or him/herself.
Tenancy by the Entirety: this method of holding title can only be used by spouses or common law partners and only on a primary residence. With this form of ownership, the property is automatically transferred to a surviving spouse or partner upon the death of the other spouse but it has the additional benefit of protecting your property against creditors from one or the other spouse. For example, if your spouse is sued for some reason, the creditor cannot lay claim on the whole property or sever the joint tenancy. This is only true if the debt is owed by one of the spouses. If both spouses owe the debt, the property can be sold to collect on the debt.
In summary, it is always important to understand your options of holding title when you are purchasing a property jointly with another person, whether it you are married or not. An attorney can help guide you through your decision, and inform you of the implications of each.
If you want to know more about these differences and which is best for you and your co-owners, our Attorneys at The Greenberg Law Firm are ready, willing, and able to review your current ownership documents or make sure the ownership of a new property is set up correctly. Contact us at 630-416-4747.