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Estate Planning - Real Property Ownership Interest

Real Property Ownership Interest

Many people are completely unaware of the ownership interest (also known as "title") that they hold in their real property. Or, if they know how they hold their title, they may not understand the differences between the various forms of ownership and the reasoning behind choosing one type over the other.

Purchasers often rely on their attorneys to simply fill in the blanks without seeking an inevitably complicated explanation for the title chosen. Nonetheless, it is important to inform your attorney of your specific situation, such as your assets, potential debts or claims against you, or any other matters that may impact the decision of which title you should hold.

This article will give an overview of the various forms of ownership and the pros and cons of each. The next time you are buying a house you will have a better idea of what you want beyond the number of bedrooms and bathrooms.

Tenancy by the Entirety

Certain forms of ownership depend upon the relationship between the owners. If you own the property alone, you are a sole owner and this discussion does not apply to you. Currently, the most favored form of ownership for a married couple is tenancy by the entirety. "Tenancy by the entirety" allows each party to own the entire estate so that neither party can deal with the property independent of the other. The property automatically transfers to the surviving spouse upon the death of a spouse.

The greatest advantage of tenancy by the entirety is that judgments (court awards for money against you) and state and federal liens (claims against your assets) against one spouse cannot be enforced against the property. If the spouse who is the subject of the judgment or lien dies first, then it is not enforceable against the estate at all. However, if the surviving spouse is the person against whom the judgment or lien is filed, then the property is subject to attachment upon the death of the other spouse. This means that persons to whom you owe money may be able to make a claim against your property because after your spouse's death the entire estate automatically transfers to you, the surviving spouse.

In bankruptcy proceedings, creditors of one spouse cannot reach or sever the estate held in tenancy by the entirety. Also, one spouse cannot sell his interest in the property without the consent of the other, nor can the property be divided or sold at a sale. It is important to note that if you wish to hold your property in tenancy by the entirety, your deed must expressly identify you and your spouse as husband and wife.

Joint Tenancy

Instead of tenancy by the entirety, you may hold your property in "joint tenancy" with another person (you do not have to be married). Under a joint tenancy, each owner has an undivided one-half interest in the property. Each owner may deal with his one-half interest separately. An individual owner may sell his share without a co-owner's consent. Consequently, unlike tenancy by the entirety, judgments and liens can be enforced against an owner's interest.

Tenancy in Common

Finally, you may hold your property with another person as "tenants in common." This type of ownership allows each person to hold an undivided interest in property. Unlike either tenancy by the entirety or joint tenancy, the ownership interest of a tenant in common does not end when he dies. In other words, there is no right to survivorship and an owner can dispose of his share in the property through his estate. Like joint tenancy, tenancy in common does not provide any protection from judgments and liens against an owner.

This website is not intended to constitute legal advice or the provision of legal services. By posting and/or maintaining the website and its contents, Lucas Law does not intend to solicit business from clients located in states or jurisdictions outside of Illinois wherein Lucas Law or its individual attorney(s) are not licensed or authorized to practice law.

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