• Kolton Morrison

Joint Tenants vs. Tenants in Common

Here we have Frank and Belle. Frank and Belle own a property together. There are a number of ways they can hold title but the two options in the spotlight for them are “joint tenancy” and “tenants in common.”

First off, a tenant is a person who occupies land or a property. It can mean they own or rent the property. Here, our focus is always home ownership so in the case of joint tenancy or tenants in common we are referring to two or more people that co-own a property. It means the property is not owned by one person individually, but the whole property is shared.

As joint tenants in joint tenancy, Frank and Belle are the co-owners of the property and have the same or equal ownership. Their interests are identical. Frank cannot own more of the property than Belle. To be in a joint tenancy they both must obtain their interest at the same time, gain their interest with the same deed, their interest held in undivided, and they both have the same interest in the property. Being a joint tenant, Frank has the right of survivorship to Belle’s share of ownership if she ever passes away and vice versa for Belle.

Now, when it comes to taxes, the estate tax is postponed. When Frank dies, Belle will automatically inherit Frank's ownership of the home and no estate tax will be owed. When Belle dies, then the estate tax will be applied to the entire property and her children or whoever inherits the home will have to pay. If a non-spouse is a joint tenant on the property then it is registered as a gift so gift-tax laws will apply. This is a reason why many people consider joint tenancy within their entire estate plan.

Another option beside joint tenancy is tenancy in common. Let’s say Frank and Belle are now owners of a property as tenants in common. With this set up, their shares can be divided unequally. Can Frank own the kitchen and backyard while Belle owns the front yard and living room? Absolutely not. Neither of them cannot own specific areas of the property, but Frank can have 30% ownership of the property as a whole and Belle owns 70%. Percentages can be broken up however agreed between Frank and Belle or between as many different owners as any particular scenario might have. Being tenants in common, Frank and Belle can obtain ownership at different times. This allows either of them to buy or gain interest in the property anytime after any previous owners have already been tenants in common. Unlike joint tenancy, if Frank were to pass away, his share of the property passes to his or heirs and or estate, not to Belle. This might leave Belle with an undesired relationship. Something to consider when figuring out ownership of a house you are buying with other people.

This is a basic overview of the differences between joint tenants and tenants in common. There are more details to consider in each and even other options of ownership. Different scenarios need different types of ownership. If what to do is ever in question, reach out to a local real estate attorney. A good one will review your goals and entire scenario to guide you in the right direction.

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