Tag: joint tenancy

Estate Planning for Joint Tenants and Tenants in Common

Different methods of owning property, such as being joint tenants or tenants in common, could affect your estate planning. You may not realize how the ownership method changes your options for passing on real estate to your heirs.

What Is a Joint Tenancy?

A joint tenancy is one method of owning real estate in Illinois that gives multiple owners equal shares in the property. The key feature of a joint tenancy is that each owner (called a joint tenant) has a right of survivorship. This means that if there are two owners and one owner dies, the second owner automatically owns the entire property outright. If there are three owners and one dies, the other two owners now hold the property.

Importantly, property owned by joint tenancy does not go through probate. A deceased joint tenant’s estate executor does not distribute the property to heirs because the other joint tenants simply take over ownership via their right of survivorship. The surviving joint tenants simply need to update the property deed.

What Are Tenants in Common?

In contrast to joint tenants, tenants in common own fractional interests in real estate. For example, John might own 25% of a property, Bob owns 25%, and Joe owns 50%. Despite their different interests, each still has the same right to use the property as the others.

In addition, tenants in common have the ability to sell, transfer, or convey their interest (or a portion of their interest) to other people. The other tenants do not have to agree or give permission for a sale. This means that tenants in common can leave their interests in the property to their heirs in a will. They also can place their interest in a trust.

Estate Planning Options Depend on Your Ownership Method

Owning a property by joint tenancy as opposed to tenants in common changes how you can estate plan. Joint tenants cannot give property to their heirs in their will or place the property in trust. Instead, the other joint tenant will receive the entire property by right of survivorship. If, however, you survive the other joint tenants, you will own the property outright and can give it away in your will.

Tenants in common have more opportunities to pass on their ownership interests to others. They can place their percentage interest in a property in trust, give it to an heir in a will, or transfer it directly to another person.

Want to start planning your estate? Local attorney Andrew Szocka, Esq. provides thorough and speedy 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.

How Does Real Estate Ownership Affect Estate Planning?

When you own real estate, that ownership could affect your estate planning in unexpected ways. The legal method by which you have title to the real estate matters, as does how you plan to distribute the property in your plan.

Joint Ownership of Property

If you own property with someone else, you must take that into account when you work on your estate plan. People most often own property with a spouse, as joint tenants with right of survivorship, or as tenants in common. In a joint tenancy with right of survivorship, when one tenant passes away, the other tenant gains full ownership of the property. Tenants in common each own a “piece” of the property. When one passes away, that portion of the property goes to his or her heirs. The other tenants retain their interests in the property.

Joint owners should take special care to include their real estate in their estate plans. For example, a tenant in common might specify that one of his or her children should inherit the tenancy. Otherwise, the tenancy could go to a spouse, several children, or a few different relatives, depending on the terms of the will.

Probate and Real Estate Ownership

Owning real estate may increase the chances that your estate will need to go through probate court. The probate court oversees distribution of the estate to your heirs. Real estate tends to be one of the larger-valued assets in most people’s estates. The higher value the estate, the more fees the estate will have to pay. Unfortunately, paying for fees associated with probate can decrease the overall value of your estate and reduce inheritances. 

You do have some options that may keep your estate out of probate court. For instance, you can place your real estate in a trust, either now or upon your death. Provided that the trust is irrevocable at your death, it will fall outside of your taxable estate and thus not be subject to probate court supervision. Further, a joint tenancy passes property outside of probate court too. Once one of the joint tenants passes away, the property automatically belongs to the other tenant in full.

Other considerations for estate planning when you own property include estate and gift taxes, calculation of basis, and transferring mortgages along with the real estate. For more help factoring your real estate ownership into your estate plan, talk to a local estate planning attorney.

Want to start planning your estate? Local attorney Andrew Szocka, Esq. provides thorough and speedy 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.

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