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Understanding co-ownership of propertyEach type of co-ownership corresponds to a different set of rules and allowances.
Tenancy in commonA tenancy in common (TIC) is for two or more people with an ownership interest. There’s no limit on the number of owners, and tenants may have unequal investment stakes. For example, one owner might have an 80% interest with two co-owners at 10% apiece. Often this corresponds to the financial investment contributed at the original purchase. Unless explicitly stated otherwise in the deed, TICs do not have rights of survivorship. If a tenant dies, property shares pass to an heir instead of the remaining tenants. Tenancy in common is available for all people, regardless of their marital status.
Joint ownershipJoint ownership, also known as joint tenancy with rights of survivorship (JTWROS), specifies that tenants hold equal ownership rights. This holds true even if only one person paid for the property — anyone listed on the deed has ownership of the complete property. All tenants are granted their deeds at the same time and, upon death, agree to pass the property on to their co-owners via survivorship rights to avoid probate. Owners must demonstrate the “four unities” to qualify:
- Time — ownership interest must begin at the same time for all joint tenants.
- Interest — all the tenants must have equal interest in the property.
- Title — all the tenants must receive the same title in the deed.
- Possession — access to the property and usage rights must be the same for all tenants.
Community propertyMarried couples may co-own title as community property in nine states. These states (Arizona, Texas, California, Idaho, Louisiana, Nevada, New Mexico, Washington and Wisconsin) recognize couples as a single financial entity. A right of survivorship must be specified so that when one spouse dies, the other can automatically take over the title. Unlike JTWROS, there’s no guarantee of automatic survivorship rights.
Tenancy by the entiretyMarried couples can also choose tenancy by the entirety (TBE) as their co-ownership model. TBE is a type of joint tenancy that comes with rights of survivorship. This ensures the property avoids a costly probate process and passes immediately into the widowed spouse’s hands. TBE views couples as one financial entity as well, so the property is considered to be owned by “one person.”
TakeawaysHere’s what you should know about co-ownership:
- Joint ownership and TIC are options for people who are not married to each other.
- Owners have unique rights to the property depending on co-ownership type.
- Survivorship rights are critical for property shares to remain with existing tenants.