Tenants in Common: A Flexible Ownership Option for Multiple Investors

You may be aware of myriad options for taking ownership of real estate property, each offering a distinct structure with varying ownership rights. It is crucial to understand the implications prior to making a selection, as there can be legal and tax consequences. The consequences can be difficult or impossible to unwind easily or change afterward. Explore the pros and cons of tenants in common, how to pass your share in the event of your death, and how to find the right lawyer to advise you.

There are many ways for married couples or individuals to own real estate property. Different methods of ownership carry specific rules about the division of each owner's interest and the succession of that share at death. It is important to seek competent legal counsel prior to acquiring title to a real estate interest, as it can have far-reaching and irrevocable legal and tax ramifications.

One of the methods of real estate property ownership is tenants in common (also known as TIC), which allows two (or more) people to co-own property. A notable feature of tenants in common is that the co-ownership can be made up of equal or unequal shares. 

In a tenants in common agreement, every owner is given the right to access the property. They also have the entitlement to use the place. It's important to note, however, that these rights are provided regardless of the size of their specific ownership share.

It is important to create a comprehensive estate plan, such as a trust, will, and power of attorney. If you intend to co-own property with other owners, setting up an estate plan may be even more vital. Consult an estate planning attorney in your area to get a detailed plan that will ensure the proper transition of your assets in case of death. 

Unlike joint tenancy, which allows your portion to be inherited by the other surviving owners, with tenancy in common, you can direct your share to the beneficiary of your choice — a spouse, child, or friend. When considering matters of death and inheritance, it is usually best to create a comprehensive estate plan that includes a trust and a will, thereby bypassing your state's probate process. 

If a co-owner passes away, the deceased owner's interest in the property will be allocated to their beneficiaries, not the surviving co-owners. Therefore, for example, you may be forced to manage and co-own this asset with the deceased individual's surviving spouse or children. 

It is important to discuss this potential eventuality with your co-owners prior to acquisition. Another essential step is to designate a succession plan to keep things running smoothly and protect your interest going forward.

Get yourself a tenants in common agreement template, and check out the best practices collected by top-rated attorneys. 

In some states, it may be presumed that your ownership is tenants in common unless it has been outlined in writing. Consider seeking competent legal advice to select the right method of holding a title. 

Providing specific directions about taking the title when purchasing a new home or investment property is the dispensation of legal advice. For that reason, you may find that your realtor, lender, or escrow and title agent is not able to tell you which approach is the most suitable. Most attorneys practice in narrow, specialized areas, so understanding what you're looking for can help.

While a recommendation from a friend, co-worker, or family member is an ideal way to find the right expert, this isn't always possible. As you consider options for legal counsel, keep an eye out for the following attributes:

Knowledge is power. So, arm yourself with the right information before signing on the dotted line.