There are a few different ways one can own property. These separate forms of ownership usually come into play with real estate, but depending on the jurisdiction, they may apply to personal property as well. I’m going to go through them briefly and (obviously) without any analysis of your particular facts. Always seek legal advice so that your particular facts can be considered.
Definitions: Title and Deed
“Title” is legalese for ownership. A deed is a document signed by an owner of property that conveys (i.e., transfers) ownership of the property to another person. This includes the simplest case where an owner sells property to a buyer, but also several other situations such as an owner giving their property to another as a gift, an owner adding another person to title as a co-owner, or an owner giving a lender title to the property as security for a home loan.
This one’s simple: One person owns the property. Upon their death, their will or trust determines who gets the property. If they don’t have a will, then a state statute will provide the default rules for inheritance.
Tenancy in Common (TIC)
In most cases, TIC is the default form of ownership where multiple parties to a transaction don’t specify their form of ownership. Essentially, each owner owns a share of the property expressed as a percentage (50%) or fraction (1/2). Let’s say that Ann (60%) and Bob (40%) own a house as TIC, and Ann has two children, Charlie and Dan. If Ann were to die, then Charlie and Dan would inherit her 60% interest in the house, and Bob would retain his 40% interest. All three would own the home together. TIC is a good way to make sure your family is taken care of in the event of your death, but things can get a bit messy. If Bob, Charlie, and Dan don’t get along, or if Charlie wants to “cash out” and walk away with money, then Bob and Dan would have to pay off Charlie’s share. If that’s not feasible, Charlie could force a sale of the house.
Also of note is that a lien against one TIC will attach to the property. Going back to Ann and Bob, let’s say that Bob has a traffic accident and is sued for $10,000. Once that judgment is docketed, it “attaches” to the property. This means that if the property is sold, or if a new loan is taken out on the property, the judgment must be paid off as part of that transaction.
A final note is that Bob could sell his 40% interest to his friend, Edwin, if he chose. This would mean that Ann and Edwin would suddenly own a house together as TIC.
All of these possibilities, and more, should be taken into consideration when choosing TIC.
Joint Tenancy (JT) with Common Law Right of Survivorship (CRS)
With JT, there are no percentages assigned. Each party is considered to own the entire property concurrently, and each party may occupy it. Usually the deed conveying to joint tenants adds the language “with common law right of survivorship” (or similar language). If so, when one of the tenants dies, then that tenant’s interest in the property instantaneously transfers to the other tenant. If the CRS language is missing, then the dead tenant’s share will instead pass to that tenant’s heirs, who become tenants in common with the surviving tenant. Going back to the hypothetical, if Ann dies, the property transfers to Bob immediately upon Ann’s death. Neither Charlie nor Dan would have any claim to the property. Note well, however, that this transfer from Ann to Bob will likely have tax consequences. Bob has just become a little more wealthy, and that wealth can be taxed.
If Bob decides to sell his interest or take out a loan on his interest without involving Ann, then the joint tenancy would be severed, and the remaining owners would become TIC. This is one of several ways in which Virginia law clearly favors ownership as TIC.
Tenancy by the Entirety (TBE)
TBE is reserved only for married couples. This form of ownership is identical to joint tenancy with common law rights of survivorship, but adds two extra benefits to the mix. First, upon the death of one spouse, as with JTCRS, the property instantaneously transfers to the surviving spouse. See Va. Code § 59.1-92.2. However, that transfer is not taxable. This is a crucial difference. If the transfer is taxable, the surviving spouse may not be able to afford the tax bill, which means the house may need to be sold. This is why TBE is preferable to JT: It makes it much easier to allow a surviving spouse to keep the family home. Second, a judgment against only one of the TBEs will not attach to the property. Both TBEs must be named defendants in the lawsuit, and judgment must be rendered against both of them, in order for the judgment to attach.
Some states, such as South Carolina, don’t have TBE. Does that mean the surviving spouse usually loses the family home? No. Under SC Law, the tax code provides an exemption for just these kinds of situations. However, judgment liens against only one TBE will attach to the property, so not having TBE available is no small thing. On the other hand, in Maryland, JT enjoys the same asset-protection benefit as TBE. Only a judgment against all JTs will attach to the property. If there are 100 JTs of the property, and a judgment is against only 99 of them, it doesn’t attach to the property.
Tenancy by Coparcenary (TBC)
Being a Virginia attorney, I have to mention this one, but this is an antiquated form of ownership we haven’t seen in a while. It arises when multiple female children inherit real estate and there are no male heirs. Because there’s no longer a difference in how the laws of ownership treat men and women, this form of tenancy is no longer relevant. (Va. Code § 59.1-336 et seq.).
It’s possible to have two or more forms of ownership applying to the same property. Where, for example, three people own the property, two of whom are married to one another, the married couple can hold their share of the property as TBE, but collectively share the property as JT or TIC with the third party. That is, where spouses Ann and Bob own the property with Charlie, the property could be divided into thirds such that Charlie owns 1/3 as TIC relative to Ann and Bob, but as for Ann and Bob’s 2/3 interest, they can hold that portion together as TBE. If Ann dies, Ann’s interest passes to Bob, and Charlie and Bob remain TIC with 1/3 and 2/3 interests respectively. Alternatively, Charlie could be a joint tenant with Ann and Bob’s collective TBE interest, so that if Ann dies, Charlie and Bob remain JTs with no percentages applicable.
Due to potential tax ramifications and legal issues specific to your state, always discuss your particular facts with a real estate attorney.
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Rob Bodine is a Virginia attorney focusing his practice on real estate and intellectual property law. He’s currently Virginia counsel with First Class Title, Inc., a Maryland title insurance and settlement company. Rob is also a licensed title insurance agent in Maryland and Virginia.