Is Joint Tenancy really the best type of ownership for real estate properties?
There are 4 common types of Tenancy in real estate ownership.
* Tenancy in severalty
* Tenancy in common
* Joint Tenancy
* Tenancy by entirety
This article will only discuss the most popular type of tenancy.
Joint tenancy is such a popular option for so many first-time home buyers that it’s often the default option chosen by buyers without an explanation or any thought to the other options available. The reason isn’t far-fetched as it appears to be the most favorable type of tenancy of real estate. But is it always the best option considering the fact that there are other types of tenancy and every individual circumstance is unique? You may need to contact a real estate agent for expert guidance in this case.
Let’s take a look at the unities of Joint tenancy and the feature that sets it apart from others
Joint tenancy can be held by two or more people
* Joint tenancy:
The four unities that must exist for this type of ownership to exist are
- Interest: Each owner has the same interest.
- Possession: All owners hold an undivided interest.
- Time: All owners receive their interest at the same time.
- Title: All owners acquire their interest with the same deed.
If one owner of a joint tenancy dies, that owner’s interest reverts to the other owners. This right of survivorship may vary by state.
The features: There are many different joint tenancy pros and cons. Most tenants will enter into a joint tenancy arrangement in order to take advantage of these distinguishing characteristics:
Pros:
- Right of Survivorship: Each tenant’s share will pass to the other tenants upon death. This right usually must be stated by the tenants in the title
- Avoid probate: Since the shares pass to the other tenants under the right of survivorship, this allows the tenants to avoid the costly probate process
- Equal Use and Possession: Joint tenants are allowed to use and possess the entire property, even if they only own a portion or share of it
- Rights to Rent and Profits: Joint tenants are entitled to a share of the rents and profits generated by the land, in proportion to the percentage that they own
Cons:
- Exposure to Creditors: In some cases, one of the joint tenant’s creditors can force a sale of the property, leaving the other joint tenants exposed to such risks even if they did not benefit from the debt of the other joint tenant.
- No Inheritance Rights: If one joint tenant dies, the property title is transferred to the surviving joint tenants. Thus, a joint tenant may not be able to transfer property interests to their children or other family members through inheritance ( in a case where the joint tenant isn’t a family member)
- Bank Accounts May Be Frozen: If the deceased is heavily in debt and the probate court is afraid that the surviving spouse or business partner may liquidate the funds in order to avoid paying the obligations, the court could freeze the account. In addition, an account may be frozen if there is a dispute over whether the surviving spouse or business partner actually contributed to the account, or if the ownership was merely for convenience.
For families who are keen on maximizing multigenerational wealth, Tenancy in common or Joint tenancy can be the right solution depending on your circumstance. While a joint tenancy looks reasonable between wife and husband, parent and child. Tenancy in common could also be the befitting option if you favor making provisions in your will to pass the estate to your heirs.
Estate planning can be complicated, and making the right choices now will save you and your family problems down the road. Consider contacting us today to learn more about the differences between joint tenants and tenants in common with respect to survivorship. We will guide you to the right estate planning attorney to cater to your specific needs.
Here at Parc Bay Real Estate – a real estate agency with your best interest at heart, we are interested in working with you to analyze, evaluate your real estate needs and help you make the right choices for the present and future. Our group encompasses a trusted team of real estate professionals with years of experience and you can rest assured that every detail from the paperwork to the realization of a commendable tenancy ownership with partners will be diligently created. We use the largest National Title Company to ensure every real estate transactions run as smoothly and effectively as possible. This is our niche; let’s use our expert knowledge to serve you!
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