Each type of co-ownership – tenants in common, joint tenant with right of survivorship, and tenants by the entirety – has different rules, along with unique pros and cons.
- Tenants in common: The first is “tenants in common,” where each person owns a specific share of the home. If a tenant in common passes away, their heirs, such as their children, would inherit their share.
- Joint tenants with right of survivorship: The second form of shared ownership is called “joint tenants with right of survivorship,” where every owner owns the undivided property collectively. In this scenario, if one owner dies, the remaining owners would still own the property as before, and the deceased owner’s heirs would not inherit part of the property.
- Tenants by the entirety: The final type of ownership, known as “tenants by the entirety,” is reserved for married couples who purchase the property together. This form of ownership also has the survivorship feature and offers additional protections and rights to the couple.
Deeds can be tricky, and a few words or a misplaced comma can make a significant difference. For example, a deed to Bob, Kelly, and John would give each person a third of the home as tenants in common.
But if the deed was to Bob and Kelly, his spouse, and John, the married couple would own half the property together, and John would own the other half. In the second scenario, if John passes away, his heirs would inherit his half, but Bob will still own half of the property if Kelly passes away. If Bob then dies, his heirs, who may differ from Kelly’s, would inherit his portion.
Because this can be confusing, plus the potential for tax issues, it is essential to consult with an experienced estate planning professional to ensure that your documents match your wishes.