03 Jun Joint Tenancy Vs. Tenants In Common
Whether it be purchasing real estate whether it be a new property, or house for your family, it usually isn’t done alone. There are several ways of doing this; here are the most common. Joint tenancy and tenants in common, both of these are words used to describe methods of buying and owning property. However both of these forms are only for buying on a fractional basis. When buying property however there is a large amount of money involved no matter what. And whenever there is money involved you want to make sure that you make very careful choices. And to make a better choice you need to understand your options. Between Joint tenancy and tenants in common, although similar, are very many differences, and depending on your intentions with your soon to be newly purchased property it’s important to understand the difference between these two.
P.I.T.T., the four unities, is a concept in the common law of real property. These properties determine how the rights to the property will be drawn up. The first of these unities is “P”, unity of possession. Unity of possession is basically determining that both co-owners of the new property have the right to occupy, possess, alter, lease or otherwise affect the property. However you still can only own a fraction of the property this right translates to the property in its entirety. The “I” stands for the unity of interest, this means that the amount of property owned by those involved is equally proportionate to the number of those sharing ownership of the property. For example, if there are four people who own fractions of the property then each person will own twenty-five percent of the property, and if there were two people then each of them would own fifty percent of the property, and so on and so on. The first “T” stands for the unity of Time, which means that all of the owners of the property must come into possession of the property at the same time or at the same time for the closing of the property. The final “T” stands for Title, which simply means that all co-owners of the property are on the deed to the property. Overall these are the properties of Joint Tenancy.
Tenants in Common is far different. Tenants in Common is very similar to Joint Tenancy however it is far more loosely regulated than its counterpart. Tenants in Common doesn’t have nearly as many strict regulations as Joint Tenancy. For example, Joint Tenancy has no Unity of Possession, each owner is given whatever he/she has paid for in comparison to the other owners. As far as Unity of Interest, Tenancy in common has no unity of interest requirement, and as such each owner can own whatever percentage they pay for. In Tenancy in Common, Unity of Time doesn’t apply, there is no restriction as to when the possession can apply or the closure of the property. Overall the regulations of Tenants in Common are far loose than the regulations of Joint Tenancy.
This also includes the right of survivorship. The Right of Survivorship is also referred to as the last man standing rule, which basically states that if one of the owners of the property dies his fraction of the property is distributed amongst the other owners in Joint Tenancy. Under the regulations of Tenants in Common this rule doesn’t apply, the fraction of the deceased owner is then translated to the estate. The main difference is in Tenants in Common you own your share outright and your heirs are your estate; whereas in Joint Tenancy you own the asset jointly with others and the heirs are the other joint tenants.
More or less Tenants in Common is basically a loosely regulated version of Joint Tenancy. Despite the loose regulations of Tenants in Common, the sharing scheme is dependent on the stipulation of the owners of the property, overall the owners have control over their portion of ownership of the estate and it’s the owners who make the final decision. The regulations of Joint Tenancy are meant to protect the interests of those involved in the investment that is the new property. Hopefully this summary has helped inform you to further make decisions towards a financially safe and secure future. Ultimately, ownership of property, whether joint tenancy or tenants in common should be held in a Revocable Living Trust to avoid the time and expense of probate and to control how this property is managed and distributed.
If you have any more questions regarding forms of property ownership, estate planning, or other financial manners feel free to contact an experienced professional at Ortiz World Wealth Advisors, by phone or email.
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