How property is titled makes a difference in how it is handled during the owner’s lifetime and what happens to it after the owner’s death. For example, Don, Holly, and Sarah own a rental property together. They could own it several ways, including as a joint tenancy or tenancy in common. What does that ownership mean, though, when if Holly dies or Don wants to sell the property? Let’s take a closer look at tenancy in common.
Types Of Property Ownership
In Arizona, there are different ways to title property, including:
- A Joint Tenancy with Right of Survivorship involves two or more owners who each have an equal and undivided interest. If one owner dies, the surviving partners take the deceased owner’s share in the property.
- Community Property with Right of Survivorship allows community property to pass to the surviving spouse without the need for probate.
- Property titled as Tenants in Common can be held by two or more people. Each owner has a vested interest, but they may be different percentages (60/40 or 40/30/30). When an owner dies, the property becomes a probate asset.
Property That Can Be Owned As Tenant In Common
Most of the time, we think of property ownership in the context of real estate. However, other property can be titled as a tenancy in common, including real estate, stocks, bonds, and bank accounts.
Advantages To Tenancy In Common
This type of property ownership can be great in the following ways:
- There’s no right of survivorship.
- Co-tenant interests may be given away.
- Property interests may pass through a co-owner’s Will.
- Shares in the property do not have to be equal.
- Co-tenants have an equal right to use and enjoy the property, no matter what percentage they own.
Disadvantages To Using Tenancy In Common
Using this type of ownership for some property may have unexpected or unfortunate consequences.
For example, perhaps the Garcia family owned a beautiful family vacation home that was enjoyed by their three children. However, as the children reached adulthood, their feelings for the home changed. One child moved cross country and rarely visited. Another had severe financial problems, including large student loan debt, and could not afford maintenance costs on the home. The third still loved the home and wanted to keep it.
Giving the home to the children as tenants in common would be difficult because the kids may not agree on what to do with the home. One child may give their interests away to someone who is not well-known to the others. One child may end up with the lion’s share of maintenance costs, although each child has the same right to use the property. And if a child passed away, their heirs may have trouble working with the other co-owners.
Learn More About The Importance Of Titles
Knowing how a property should be titled makes a big difference in your estate planning. At Keystone Law Firm, we use our estate planning experience to help clients like untangle property issues relating to your estate plans. Call us at (480) 418-8448. We offer services for clients throughout Arizona, including Chandler, Gilbert, Sun Lakes, Tempe, Phoenix, Mesa, Scottsdale, and Apache Junction.