Tenancy in Common vs. Joint Tenancy – Which One Is Right for You?
When it comes to owning property with others in Virginia, there are two common ways to structure your ownership: tenancy in common and joint tenancy. These methods have distinct characteristics and implications for your estate planning. In this blog post, The Virginia estate planning attorneys at our law firm discuss the differences between these two forms of co-ownership arrangements with the aim of helping you determine which might be the right choice for your specific needs.
What is Tenancy in Common?
Tenancy in common is a way of owning property with other people, where each co-owner has their own separate share of the property. Here are some important things to know about tenancy in common:
1. Equal or Unequal Ownership: In tenancy in common, you and the other co-owners can have equal shares of the property, or the shares can be different. For example, if two siblings own a property as tenants in common, one might own 60% of it, while the other owns 40%.
2. Separate Rights and Titles: Each co-owner has their own title to their share of the property. This means they can sell, mortgage, or pass on their share without needing permission from the other co-owners. As such, each co-owner has a lot of flexibility and control over their share of the property.
3. No Rights of Survivorship: One essential thing to remember is that tenancy in common does not have a “rights of survivorship.” This means if one co-owner passes away, their share of the property does not automatically go to the other co-owners. It becomes part of their estate and is passed on to whomever is named in the deceased co-owner’s will or trust, or otherwise legally entitled to inherit it.
What is Joint Tenancy?
Joint tenancy is another way of owning property with other people in Virginia, and it has some important differences from tenancy in common:
1. Equal Ownership: Usually, joint tenancy means that all the owners have equal shares of the property. In essence, each co-owner is considered to have an “undivided” interest in the entire property. This means that there is only one title to the whole property, and you cannot sell or separate your individual interests.
2. Rights of Survivorship: The most significant difference between joint tenancy and tenancy in common is the “rights of survivorship.” In joint tenancy, if one owner passes away, their ownership interest automatically passes to the other owners without going through a legal process. This offers a streamlined process for estate planning, as it ensures that when one co-owner passes away, their ownership interest is equally distributed among the surviving co-owners.
3. Equal Responsibility: All co-owners in joint tenancy share equal responsibility for things like property taxes, maintenance, and mortgage payments. Furthermore, the actions of one co-owner can affect all co-owners, potentially putting the property at risk in case of financial troubles.
Is Joint Tenancy or Tenants in Common Right for You?
Now that you know about these two common ways of owning property with other people, you might be wondering which one is right for you. The answer depends on your specific situation and estate planning goals.
- Tenancy in Common: If you desire more flexibility and control over your ownership interest in the property, tenancy in common might be a good choice. Co-owners can have unequal shares of interest in the property, accommodating varying financial contributions. This form of co-ownership can also be advantageous if you have specific wishes regarding the distribution of your share of ownership after you pass away. Additionally, tenancy in common segregates liability between title owners to a certain extent, in that the other tenants can hypothecate their shares separately from yours. That might be a pro and a con, though, so be sure to seek specific advice on your matter.
- Joint Tenancy: If your main goal is to ensure a smooth transfer of the property to the surviving co-owners when you pass away, then joint tenancy is a good option. It offers the advantage of the right of survivorship, eliminating the need for probate proceedings. As such, joint tenancy is a popular choice for married couples and family members who wish to simplify the estate planning process.
Important Caveat: holding joint tenancy to real property with children is a common tax mistake. Property held as joint tenants with the right of survivorship does not receive a step up in basis at the death of a joint tenant. So, if your intention is to convey property to your children, you should almost never hold the property as joint tenants with them.
Contact an Experienced Virginia Estate Planning Lawyer
While tenancy in common and joint tenancy are the main options for co-owning property in Virginia, there are a few more things to think about:
1. Taxes: Your choice between tenancy in common and joint tenancy can affect your taxes. It is therefore a good idea to talk to a professional who understands how each option might impact your estate and income taxes and can refer you to a qualified tax expert for information.
2. Liability: The different properties of Tenancy in Common and Joint Tenancy affect your exposure to liability of the co-owners.
3. Legal Advice: When making decisions about your property and estate planning, it is always a good idea to consult with an experienced legal professional who can advise you on what might be best for your specific situation.
Contact our law firm today at (703) 553-2577 or use the contact form to arrange a consultation with an experienced Virginia estate planning attorney.
The information on this site is for general informational purposes only. The information presented in this site is not legal advice or a legal opinion. You should seek the advice of legal counsel of your choice before acting upon any of the information in this site.