Real Estate Term of the Day: Joint Tenancy, Ownership Form, Right of Survivorship, Severalty & Tenancy in Common
JOINT TENANCY – ownership of real estate by 2 or more persons, each of whom has an undivided interest with the Right of Survivorship. Typically used by related persons. (Barron’s Dictionary of Real Estate Terms)
OWNERSHIP FORM – methods of owning real estate, which affect income tax, estate tax, continuity, liability, survivorship, transferability, disposition at death and at bankruptcy. (Barron’s Dictionary of Real Estate Terms)
RIGHT OF SURVIORSHIP – the right of a surviving joint tenant to acquire the interest of a deceased joint owner. (Barron’s Dictionary of Real Estate Terms)
SEVERALTY – the ownership of real estate by an individual as an individual. (Barron’s Dictionary of Real Estate Terms)
TENANCY IN COMMON – an ownership of real estate by 2 more persons, each of whom has an undivided interest, without the right of survivorship. Upon dead of one of the owners, the ownership share of the descendent is inherited by the party or parties designed in the decedent’s will. (Barron’s Dictionary of Real Estate Terms)
There are several ways to own real estate. The most common are tenants in common, joint tenants and in severalty.
Below is a great article explaining the difference between joint tenants and tenants in common via Winright Law:
Tenants in Common vs. Joint Tenants
Prospective homeowners are faced with many important decisions when they decide to purchase a home. One of the most important decisions when buying a home with one or more other people is whether you hold the title to the property as joint tenants or as tenants in common. The effects of this decision arise mainly upon the death of one of the owners of the property, but can also affect the amount of property transfer tax that the new owners must pay.
The primary difference between joint tenants and tenants-in-common is that joint tenants benefit from the right of survivorship. The right of survivorship ensures that when one owner dies, the property passes to the other surviving owner(s) without having to go through the court process of probate. This process involves a court distributing the deceased owner’s property and can be long and costly. Married couples often choose to own property as joint tenants to avoid probate, though some decide to own as tenants-in-common to claim a higher First Time Home Buyer’s credit.
On the other hand, tenants-in-common may freely decide the share of the property that each individual owns whereas joint tenants each own an equal share in the property. As well, each tenant-in-common is entitled to pass their share of the property on to another person via a will, a real estate transfer, or even sell it. However, upon the death of one of the tenants-in-common, their share of the property passes according to either their will or the rules governing property owners who die without having written a will. The property will then have to go through probate and be subject to probate fees – a subject we will discuss in one of our upcoming articles.
There are benefits and drawbacks to each form of property ownership. We can help you decide whether joint tenancy or tenancy-in-common is right for you and your family.