In tenancy in common, two or more people own a property. The shares can be unequal and do not automatically pass to the other owner(s) at one owner's death.
Attorney Thomas B. Burton answers a reader question about the reader's options for selling a condo owned jointly with another person when the other person does not want to sell.
Joint Tenants with Rights of Survivorship (JTWRS) Holding title with someone else in this regard would mean that there is automatic survivorship rights in the event death should befall one of the parties. Tenants by The Entirety (Joint Tenants with Rights of Survivorship as between "Husband and Wife") Title held this way ensures automatic reversionary interest, by operation of law, between spouses should one pre-decease the other. Tenants in Common No automatic reversionary interest occurs in the event of the death of one of the parties; their interest would pass as per one's will; or if there is no will, via the intestacy statute of New York State. Deeding of Interest-Joint Tenants with Rights of Survivorship Absent "qualifying language" to the contrary, if a joint tenant with right of survivorship deeds his/her interest to another, a tenancy in common is created between the residual joint tenant and the newly deeded owner. Deeding of Interest-Tenants by the Entirety This tenancy cannot be disrupted unless BOTH spouses "sign off" on the deed; or in the alternative, a Judically Declared Divorce is granted mandating that ownership of the property will now vest in one of the spouses. Deeding of Interest-Tenants in Common Absent "qualifying language" to the contrary, if a tenant in common deeds his/her interest to another person, the residual owner and the newly deeded owner will hold title as tenants in common. Be specific; Do not Speculate or Assume Defer to your Deed and be sure that the way in which title is held is "specifically delinated" to avoid any potential for confusion or room for error; as well as specified for future conveyances. Failure to do so can place you in a precarious situation.
COMMUNITY PROPERTY In Nevada MPs are considered to hold title to property, whether personal, real, intangible, etc., as community property (CP) for all property acquired after the date of marriage. There are a few exceptions discussed in the next paragraph. The husband and wife, unless they otherwise agree, are considered to hold equal shares in community property. The value each spouse brings to the marriage is presumed to have equal value. That means the value one spouse who works outside the house and earns all the family income has the same value as the spouse who maintains the family home and children. See Nev. Rev. Stat. (NRS) 123.225. Exceptions to when MPs hold community property are: 1) Property brought into the marriage, unless such property is later transmuted; 2) MPs agree that property obtained after the date of marriage is separate property (See NRS Chapter 123A); 3) MPs expressly provide that they desire to title property other than as CP (i.e.. taking title to property as "Joint Tenants.") 4) Inheritance or receipt of gift of property by one spouse; 5) Money damages recovered as a result of personal injury; 6) Federal exceptions such as pension plans of a spouse who works for the federal government. MPs can also allocate the ownership interests in CP for some amount other than equally. Instead of 50/50 as the law presumes, MPs can hold property 10/90, 20/80, etc. Additionally MPs can hold property either as CP with NO rights of survivorship or CP WITH rights of survivorship (CPWROS). The prior allows a spouse to devise her/his property to whomever s/he wants at death. The latter says that the surviving spouse receives the property by operation of law at the death of his/her spouse. See my Legal Guide that discusses the three ways to convey property at death to get a better understanding of "by Operation of Law." Holding CP also allows the surviving spouse to claim the WHOLE value of the CP at the death of the first spouse as a deduction when filing income taxes when the CP is sold in the future. This is commonly known as step-up in basis. This allows the surviving spouse to save income taxes in the future for the increase in value that accrues from the date of purchase to the date of death of the first spouse. Be sure to speak to your tax preparer on the details of this. See Internal Revenue Code (IRC) 1014(b)(6). Finally, MPs can hold title to property as CP in a revocable living trust. All they have to do is to declare in their joint trust that property held in the trust is CP. JOINT TENANCY Another way MPs can hold title to property, personal or real, is as Joint Tenants aka Joint Tenants with Rights of survivorship (JTWROS). See NRS 111.065. JTWROS provides that the surviving spouse, by "operation of law" will receive the property upon the death of the first spouse. This is the same to Community Property WROS in regards to conveyance, but differs in that only the portion of the property attributable to the deceased spouse is available for step up for income tax purposes. The portion of the property attributable to the surviving spouse receives no step up. Unlike where married persons can only hold CP, joint tenancy can also be held by persons who are not married. Joint tenancy is only created when the words "joint tenancy" or "joint tenancy with rights of survivorship" are expressly written in a controlling document. The reason is, while joint tenancy is an accepted way to hold title, public policy abhors it. The reason is that generally speaking, we Americans do not like forfeiture. In the case when someone dies, his/her interest if forfeited to the survivors, thus denying the heirs of the deceased the value of the property. With the tax advantages available to MPs to hold property as CP and the ease of declaration, I am baffled that joint tenancy is the overwhelming way (I am guessing 90% or more) MPs hold title in Nevada. Unless there is a compelling reason not to hold title to property as CP, where there are a few narrow exceptions, MPs should hold title to all property in Nevada as CP. As stated in the discussion of CP, exception number 3, joint tenancy is an express declaration that MPs do not want the income tax advantage given to community property under IRC 1014(b)(6). TENANCY IN COMMON The final way MPs can hold title to property in Nevada is tenancy in common. This way of holding title to property says that each tenant/owner, has a right to convey his/her interest to whomever s/he desires during life and at death. In one regard, tenancy in common is unlike joint tenancy where the other tenants/owners get the deceased tenant's/owner's interest automatically at death. But, tenancy in common is like joint tenancy in that persons who are not married may also hold title to property. See NRS 111.060. This form of holding title is the default way if the required language of joint tenancy does not exist, or is defectively written.
Imagine this... You and your spouse are a married couple, with two children. You own your home, a checking account, a savings account, a few stocks, bank CD's, and your two cars. You then decide that you do not want to make wills, because you each feel that the surviving spouse should receive everything upon the death of the first spouse. Later, you both are in a car accident where your wife is killed. You then die several weeks later, without having regained your health or mental capacity. Without a will to govern the distribution of your property, your estate is distributed according to state law. You and your wife have not designated a guardian to care for your children, or indicated who you wish to be a personal representative to handle your estate. The court will appoint someone who does not know your wishes. One of your children might be capable of handing her inheritance, but your other child spends too much. It would have been nice to have created an agreement for how such funds would become available. Too little, too late. No provisions were made for the distribution of your wife's heirlooms. You wanted your employee to get a rare car. But not now. Be smart, draw up a will for each of you. Provide for the distribution in the manner you each want, including jointly owned property. Plan ahead, always. What is Joint Tenancy (and other survivorships)? Many people own property in "Joint tenancy" with another person or persons-usually their spouse, a relative, or in some cases, a business associate. It can be a convenient method of ownership and usually allows for the easy transfer of property upon death of one of the joint tenants. However, holding property in joint tenancy does not necessarily eliminate the need for court proceedings when one joint tenant dies, and it is not a substitute for a will. Joint tenancy is a way in which two or more persons may hold title to property in equal, undivided shares. When one owner dies, his or her share of the property is not passed on according to a will, but automatically becomes the property of the surviving joint tenant(s). The last survivor becomes the sole owner of the property and can dispose of it as he or she wishes. For example: Huey, Dewey and Louie are brothers that own 30 acres of agricultural land in joint tenancy. Huey dies, and his share passes equally to Dewey and Louie. Huey's wife, children or heirs don't get that share. Dewey dies a year later, and his share passes to Louie who will then own all of the land entirely. Louie can sell it, leave it to his own children or others of his choosing, give it to a charity, or do whatever he wishes with it. The heirs of Huey and Dewey have no claims to the land. Changes the facts, for example: Huey died and his part went equally to Dewey and Louie. Dewey and Louie don't have to remain in joint tenancy with each other. They may sever the joint tenancy and establish another method ownership, like "tenancy in common," which would then allow each remaining brother to leave their share to their respective heirs. What is "tenancy in common?" When two or more people own property as "tenants in common," each is the sole owner of his or her share. Upon one owner's death, the property is a part of his or her estate and can be passed on by will or under state law if there is no will. For example, a man and his son may own land as tenants in common. If the father should die, he could leave his half of the land to his widow, another child, the son who owns the other half or any other person. Tenancy in common does not establish a survivorship interest like joint tenancy. Can a survivorship interest pass by will? No. Property is owned so the last survivor owns it upon the death of the other owner(s). The most carefully prepared will or estate plan cannot affect that right of ownership. Only the last survivor may dispose of the property by will. What forms of property can be held in joint tenancy? Practically any kind of property can be held in some form of "survivorship" (so called because it establishes the survivor as the owner of the property). The most common forms are real estate, motor vehicles and securities, which are held in joint tenancy, and checking or savings accounts or government bonds, which are registered in co-ownership. While it is possible for tangible property such as grain or inventories to be owned in survivorship, such ownership can be difficult to prove if there is no evidence of a title, such as a deed or a bill of sale. A Payable on Death (POD) account is the property of an is payable to one person during his or her lifetime, and to one or more POD payees upon that person's death. Or, it may be payable to more than one person during their lifetimes and then payable to one or more payees upon the death of all of the owners. For example, Homer wants to provide cash support his son, Bart, after his death but does not want Bart to have access to any of his funds while he (Homer) is still alive. Homer establishes a POD account naming Bart as payee. During Homer's lifetime, he has complete access to the money and upon his death, the account is payable on request to Bart. How should the names be written on legal documents? On legal documents establishing a joint tenancy, the names of the owners should be connected with the word "and." The names should be followed with the words "as joint tenants and not as tenants in common." For example, a husband and wife might own a home for which the title reads, "John Doe and Jane Doe, as joint tenants and not as tenants in common." If you have jointly owned property for which the title or record of ownership is worded differently, it may still be legally acceptable, but you may want to review it with your lawyer. Are all Survivorships written this way? Not necessarily. Federal rules state that government bonds registered "one or another" cause the survivor to own the bond. State law provides that certain bank, savings or industrial accounts registered "one or another" or registered "one and/or another" cause the survivor to own the account. Some types of accounts also use the words; "with right of survivorship" after the names of owners, and these accounts also pass to the survivor upon death of the first owner. These other forms of survivorships may not be true joint tenancies, but if they are properly created they enable the last survivor to own all of the property. Joint tenant rights regarding jointly owned property and disposition without the others knowledge or consent. Each joint tenant has full access to jointly owned bank accounts held in joint tenancy, and could withdraw all funds from the account without the knowledge or authorization of the other. With real estate, however, one joint tenant would have the right to sell his or interest in jointly owned property, but could not provide the buyer with good title to the entire property. Such a sale, without the joinder (legal agreement) of the other joint tenant(s), might be impractical to consider for several reasons. Such a sale would have the effect of severing the joint tenancy and converting it to a tenancy in common with the remaining joint tenant(s), which could give rise to disputes concerning their respective rights and obligations. Does survivorship avoid court proceedings? Not entirely. Property held in a survivorship which meets the tests of Nebraska law does not need to undergo regular probate in Nebraska. However, such ownership does not always avoid court proceedings. Although the property belongs to the survivor(s), it may still be subject to state inheritance and estate taxes and federal estate tax. State inheritance tax is determined by a special proceeding in the county court. Property owned in joint tenancy by a person and his or her spouse (and no other party) passes to the surviving spouse without an inheritance tax determination, provided the deceased spouse died after January 1, 1983. How does a court determine what taxes are due? A tax determination is based upon the assets of the estate, certain exemptions which are available, the relationships between the deceased and the heirs and other factors. In terms of jointly owned property, the tax determination is based upon each owner's contribution to the acquisition of the property. For example: Sonny purchases a $100,000 CD in his name and his daughter Karen's name. Sonny contributes the full purchase price. When he dies, the CD is payable to Karen, but its value is included in the estate for tax purposes. If Karen dies first, Sonny has no tax liability on the CD since he could show that he made the full $100,000 contribution. Tax laws are complex, and their various benefits and obligations, particularly for property held by husband and wife, cannot be covered here. It is important to know, however, that joint tenancy is not always the most beneficial and economical way to own property and that other estate planning devices may better meet your needs both now and in the future. What if the estate is unable to pay the taxes? In an insolvent estate, where the assets are not sufficient to pay due debts and taxes, jointly owned property owned by the deceased may pay these debt, taxes and expenses. What should be done about existing survivorships? Whether to continue to hold property presently owned in some form of survivorship, or to acquire additional property in that form of ownership, requires careful review based on your individual circumstances. Changes in tax laws, property law and property values, as well as many other factors, affect such decisions. Joint tenancy and other survivorship interests involve serious consequences. You and your lawyer should review any existing survivorship arrangements regularly, and consider carefully any such future arrangements. Remember, joint tenancy is not a substitute for a carefully prepared will and estate plan.
Individually This one is pretty self-explanatory. One person owns the real estate, and should something happen to them, the property would pass according to their estate plan, or if they had no estate plan, then according to the intestacy laws of the state in which the property is located. Disregarding homestead laws, this could have huge implications for some cohabitating couples. Take the following example: Jack and Jill, an unmarried couple, have made the decision to live together. Even more significantly, they have decided to buy a nice two bed-room condo in the city. Jack, being self-employed for only a few years has trouble qualifying for a loan, so Jill applies, and is approved for funding on her own. She then purchases the condo for both of them to live in together with the understanding that it belongs to both of them. Fast forward a year, and Jill is killed in a tragic car accident. Jack, distraught, finds out that Jill didn't have a will, or any estate planning for that matter. As her estate moves through probate, he finds out that under the intestacy laws of their state, property belonging to individuals who die without a will goes to their siblings by law. Not good for Jack. Since Jack and Jill were not married, Jill had no estate planning done, and she owned the condo by herself, it is now the legal property of her siblings as tenants in common, and not Jack. It's doubtful that is what anyone wanted, even Jill's siblings, but it illustrated the dangers of owning real estate and not appropriately planning for what may happen should the owner die. Tenancy in Common Tenancy in common is a way for two or more people to hold title to property. As tenants in common, individual owners may own any percentage of the property. For example, Jill's three brothers in the above example would own the property 1/3, 1/3 and 1/3. But, say that one of her brothers, Jeff, decides that he'd like to gift his portion of the property to his two kids, who split Jeff's interest 50/50. Now, the property is owned 1/3 by brother 1, 1/3 by brother 2, and 1/6 by each of Jeff's kids. Even though the owners all own different percentages of the property, all are allowed to use the entire property. That means that all of them are free to enjoy weekend getaways at the city condo without having to obtain permission from the other owners. An interest in real estate held as a tenant in common is freely transferrable, whether by gift or sale during life, or by bequest upon death. A nice feature, no doubt; however, it can also have some negative consequences. For example, say that one of Jeff's kids sells his 1/6 interest in the condo to a friend from college. The friend, like the rest of the owners, is now allowed to use that condo without approval of the other owners. A potential problem since he has a tenancy to throw wild parties and isn't exactly a clean individual. All of a sudden, the consequence of holding the property as tenants in common is that the other owners are forced to put up with this crazy college friend trashing the condo and building a negative reputation amongst the other condo owners in the building for all the noise complaints he receives. Joint Tenancy Similar to a tenancy by the entirety, a joint tenancy is a way for two or more individuals to hold a piece of property. In a joint tenancy, each individual holds an undivided interest in the property. The main differentiating feature of a joint tenancy over a tenancy by the entirety is that, upon the death of an owner, the deceased owner's interest in the property automatically passes to the other owners by operation of law. This feature, called a right of survivorship is extremely beneficial from an estate planning perspective, especially for unmarried co-owners of property who would otherwise not inherit from each other upon death. So, in our example of Jack and Jill, a joint tenancy ownership of the condo could have prevented Jack from getting kicked out on the street upon Jill's death. Instead, even though Jill had no will, and the state intestacy laws said that her property passes to her siblings, the condo, help in joint tenancy with Jack would automatically go to Jack and Jack alone. Tenancy by the Entirety Like a joint tenancy, a tenancy by the entirety is a type of shared ownership. While most states recognize tenancies by the entirety, not all do. The important differentiating feature of a tenancy by the entirety is that it is only available to married couples (so, not Jack and Jill unless they tie the knot). Like a joint tenancy, an interest tenancy by the entirety passes automatically to a surviving spouse upon death of the other. Just as important, tenants by the entirety cannot transfer their interest in the property without the consent of each other. Owning property with other individuals can carry significant consequences depending on how the property is titled. That's why it's important for all co-owners to research the potential ways title can be held and, if appropriate, discuss their situation with an attorney who can advise them on the potential benefits and drawbacks of taking title one way over another in their state.
Tenancy in Common Two or more individuals can jointly hold title to real estate as tenants in common. The individuals can hold different percentage interests as they deem appropriate. Each person's share can be transferred (via sale or otherwise) or inherited from his or her estate. In other words, title does not automatically transfer to the surviving joint tenant(s) on the death of one of the holders of title in a tenancy in common situation. Joint Tenancy with Rights of Survivorship In this situation, two or more individuals can jointly hold title to real estate, however unlike a tenancy in common, upon the death of a joint tenant, his or her share passes to the other joint tenant(s). Title is not held in percentages. Instead, each person holds title to the entire parcel or parcels of real estate together with the other joint tenant(s). Tenancy by the Entirety In this situation, the title is held identical to joint tenancy with rights of survivorship, but with a few special rules: (a) Only two people can hold title to real estate as tenants by the entirety. (b) The holders of title must be husband and wife. (c) The real estate must be the parties' primary residence. The major benefit to holding title this way is that the property is shielded from the judgment creditors of any one of the parties. For example, if a husband and wife own their property as tenants by the entirety and the husband has a money judgment entered against him, the real estate is safe from the interests of the husband's creditor(s) as long as the property remains in tenancy by the entirety. If, however, the money judgment is entered against both the husband and the wife, the property is fair game to the creditors. Land Trusts Real estate can also be held in land trusts, wherein title to the real estate is held by a party (the land trustee) for the benefit of another party or parties (the beneficiaries). The land trustee is said to hold legal title. The beneficiaries hold equitable title. There is a written land trust agreement between the beneficiaries and the land trustee with specific instructions on how the parties deal with the property. The land trustee is generally a land trust company or a bank. The holders of the equitable title (the beneficiaries) can hold said equitable title in the same manners as listed above. The beneficial interest in a land trust can also provide for contingent beneficiaries so that the equitable title can pass to others upon death of the original beneficiary or beneficiaries and avoid probate, at least for the real estate. Land trusts are often set up when the owner(s) of real estate do so for privacy reasons in that they do not want their name appearing in the public records as an owner of real estate. Corporations and LLCs Corporations and limited liability companies (LLC) can also hold title to real estate, but the legal entity (the corporation or LLC) holds title to the real estate.