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.