Understanding Real Estate Ownership: Joint Tenants with Rights of Survivorship vs. Tenants in Common

How you own real estate with any co-owners is an integral piece of your estate planning. Real estate ownership can take different forms, each with its own implications for ownership rights and property disposition. Two common types of ownership in real estate are joint tenancy with rights of survivorship (JTWROS) and tenancy in common (TIC). Understanding the differences between these forms can significantly impact your decision-making process when acquiring property. Let’s delve into each:
Joint Tenancy with Rights of Survivorship (JTWROS):Joint tenancy with rights of survivorship is a form of ownership where two or more individuals hold equal shares of the property. The key feature of JTWROS is the right of survivorship, which means that if one owner dies, their share automatically passes to the surviving owner(s) without going through probate. Here are some key points:

1. Equal Ownership: Each owner has an equal and undivided interest in the property.
   
2. Right of Survivorship: Upon the death of one owner, their share transfers directly to the surviving owner(s) automatically. This process avoids the need for probate proceedings.
   
3. Unity of Time, Title, Interest, and Possession: All owners must acquire their interests at the same time, by the same title, with equal ownership interests, and each must have an equal right to possession of the whole property.
   
4. Cannot Will Ownership: An owner cannot leave their share to heirs in a will; it automatically passes to the surviving co-owners.
   

Tenancy in Common (TIC):Tenancy in common is another form of joint ownership where each owner can hold different ownership percentages, and there is no right of survivorship. Here’s what you need to know about TIC:

1. Individual Ownership Shares: Unlike JTWROS, TIC allows owners to hold unequal shares of the property. For example, one owner might have a 60% interest, and another might hold 40%.
   
2. No Right of Survivorship: In TIC, if one owner dies, their share of the property is passed on to their heirs as specified in their will or according to state law. This share does not automatically transfer to the surviving owners.
   
3. Flexibility in Ownership: Owners can sell, transfer, or mortgage their individual shares without the consent of the other owners. This provides more flexibility compared to JTWROS.
   
4. Creation: TIC can arise by deed, will, or operation of law. It does not require the same unity of time, title, interest, and possession as JTWROS.
   

Key Considerations When Choosing Between JTWROS and TIC:

• Estate Planning: JTWROS is often preferred for estate planning purposes as it ensures seamless transfer of ownership to surviving owners without probate. TIC, on the other hand, allows for more control over who inherits the property.
  
• Relationship Between Owners: JTWROS is typically used between spouses or family members who wish to ensure that the surviving owner(s) retain full ownership automatically. TIC is common among business partners or friends who want more flexibility in ownership.
  
• Legal and Tax Implications: Both forms have different legal and tax implications, especially concerning income tax on rental income and capital gains taxes upon sale.
  

In Montana, multiple owners of a property will by default own the property as Tenants in Common unless their property deeds specifically states that the owners own the property as joint tenants with rights of survivorship. Be sure to check the deed on your property to see how you own the property with any co-owners. Whether you choose joint tenancy with rights of survivorship or tenancy in common depends largely on your specific circumstances, relationship with co-owners, and long-term plans for the property.

If you have questions on this or need to update your property ownership, give us a call!