When you buy property, the property you buy may not be just for you. You may be buying it with someone else, as co-owners, or you may be buying it with an eye to your family and what they will inherit when you are gone.
Both of these concerns call into play the necessity of understanding the types of joint property ownership that exist when you buy property. Although many are similar, there are slight nuances and differences between them.
Life estates allow you to live in the property, use it—even collect rent from it. But the other person, called the remainderman, will inherit the property when you pass. That remainderman has no say over the property on a daily basis—although he or she may have to consent to certain transactions, like selling or liening the property. Life estates can be a good vehicle for estate planning and avoiding probate.
A joint tenancy is a true co-ownership—both tenants own the property together. Generally, they have equal rights to use or live in the property, both will have to consent to anything that is done on the property, will share in any rents or profits collected from the property and will share in the profits of the sale of the property. They also, potentially, can be liable for any liabilities, like fees, fines, or code violations, that the property incurs.
One good thing is that, like a life estate, a joint tenancy has a right of survivorship. That means that when one tenant dies, the other automatically inherits the other’s interest in the property, thus avoiding probate.
Tenants in Common
Tenants in common is the same as a joint tenancy, except there is no right to survivorship. The deceased’s interest becomes part of the deceased’s estate and passes to whomever the deceased designated.
So, if A and B own a home, and A dies, with a joint tenancy, B would own 100% of the home. But if they were tenants in common, B would still only own 50% of the property, and A’s 50% would pass to whomever A designated to inherit it (or whomever the state’s intestate laws say gets the property, if there is no will).
Tenancy by the Entireties
Tenancy by the Entireties, or TBE property, is property that is owned by a husband and wife jointly. The parties must have been married when the property was acquired. The property will pass to the other spouse when one passes away.
One big benefit of TBE property is that there is a lot of asset protection with TBE property. It can be very difficult for creditors of one spouse, to collect TBE property to satisfy debts. TBE property isn’t just for real estate, but real estate is a large investment and may accrue significant equity, making TBE property a good asset protection vehicle and a good estate planning tool, all at once.
Contact our New Jersey real estate attorneys at The Law Office of Agnes Rybar LLC today with questions; we can help you understand the different kinds of property ownership that may be right for you.