PROPERTY OWNERSHIP: THE OPTIONS AND ASSOCIATED ADVANTAGES.
If you are an individual who owns real estate in Illinois, you may have questions about how your ownership is classified under Illinois law. Illinois has many categories of land ownership, and each may have advantages or disadvantages depending on your situation.
The most common types of real estate ownership are 1) Individually, 2) Tenants in Common, 3) Joint Tenants, 4) Tenants by the Entirety, and 5) in a Trust.
An individual with property is probably the simplest form or ownership. However, this form of ownership does come with potential complications. If you own property individually, you may have been conveyed the property in “Fee Simple,” or as a “Life Estate.”
Fee simple ownership provides absolute control. Your rights to the land are indefinite and can be conveyed at any time and by any means. If you were granted only a Life Estate in property, your ownership rights are more limited. Upon your death, the property will revert back to another individual or entity, often called the “remainderman.” As a result, almost all property transactions made by the owner of a Life Estate interest must be approved by the remainderman.
Just as common as individual ownership is ownership by two or more people who own together as a group. This is when the distinction between Tenants in Common, Joint Tenants, and Tenants by the Entirety is important.
Tenants in Common own portions of property. If there are two Tenants in Common, each generally owns one half of that property. Three Tenants in Common typically own portions of the property in thirds. It should be noted that Tenants in Common can decide to own the land in any percentage they deem appropriate, e.g. 80%/20%, etc.
Upon the death of one Tenant in Common, his or her interest goes to the decedent’s estate. For example, if A, B, and C own land as Tenants in Common with equal interests, and C dies, the property is now owned a third by A, a third by B, and a third by C’s estate.
Joint Tenants own land in a significantly different manner than Tenants in Common. The most important distinction is called the “Right of Survivorship.” If two Joint Tenants own property, and one dies, the whole land automatically transfers by operation of law (no written deed required) to the other Joint Tenant.
Tenants by the Entirety are similar to Joint Tenants. As with Joint Tenants, Tenants by the Entirety enjoy the Right of Survivorship. When one Tenant by the Entirety dies, the land automatically goes to the other Tenant.
But there are unique characteristics of Tenants by the Entirety. First, it is only available to married couples. Second, spouses are protected from certain creditors if they own property as Tenants by the Entirety. If one spouse owes a debt to a creditor that is solely in his or her name, the creditor cannot attach a judgment for that debt to the other spouse’s interest in the property. As a result of these benefits, many married couples prefer to own property as Tenants by the Entirety.
Finally, real estate can be owned in a Trust. You can convey real estate into a Trust during your lifetime, or your Last Will and Testament can convey the property into the Trust at your death.
The advantage of putting real estate in a Trust can be significant. Illinois law requires all estates that own land to go through a process called “Probate.” This is procedure when a court appoints someone to distribute the property owned by your estate. Probate can be a relatively long and expensive process. Estates without real estate may be exempt from Probate, saving time and money.
If you are interested in learning more about options regarding ownership of your real estate, or whether keeping property in a Trust is appropriate, local attorney Andrew Szocka provides thorough and speedy real estate and estate planning help in the Chicagoland area. To schedule a free initial consultation, visit the Law Office of Andrew Szocka, P.C. online or call the office at (815) 455-8430.