Over the course of your lifetime, you will likely co-own property with someone. If you marry, you may purchase a home that you want to title in both your name and your spouse’s name. If you own a business, you may also decide to purchase real property with a business partner. You might also decide to invest in property with a sibling, adult child, or close friend. As the North Andover estate planning attorneys at DeBruyckere Law Offices explain, the manner in which you hold that joint title is more important than you may realize.
Why Does It Matter How Property Is Titled?
The manner in which jointly held property is titled is not something most people think much about – but they should. Not only can the type of joint title you choose impact your own rights to the property, but it can also potentially subject your interest to the property to unnecessary risks. In addition, title takes precedence over other transfer methods in most states, meaning if there is a conflict between a gift made in a Will and the manner in which property is titled, the title wins.
Types of Joint Ownership of Real Property in Massachusetts
Joint ownership of real property is governed by state law, meaning each state decides what types of joint ownership will be recognized within the state. At the time you purchase real property, you should be asked which type of joint title you plan to use if you purchased the property with one or more additional owners. The types of joint ownership recognized by the Commonwealth of Massachusetts include:
- Tenants in Common – tenancy in common is the default type of joint ownership in Massachusetts, meaning that if the ownership instrument is silent with regard to the type of joint ownership, the law will presume you hold it as tenants in common. With a tenancy in common, each owner owns a separate fractional share of undivided property. In addition, there is no limit to the number of owners and owners can own differing shares of the property. For example, you might own property with your three adult children wherein you own 40 percent of the property and they each own 20 percent. As a tenant in common you can sell, mortgage, transfer, or assign your share of the property without the consent of the other owners. Your interest in the property will become part of your probate estate after your death if you hold the property as a tenant in common. As such, your Last Will and Testament (or other estate planning instrument) will determine who inherits your interest in the property after your death.
- Joint Tenants – the most important benefit, for most people, to holding property as joint tenants in Massachusetts are the rights of survivorship that attach. As a joint tenant, your interest in the property does not become part of your probate estate after your death. Instead, your interest passes automatically to the surviving owner(s) outside of the probate process. Along with making it much easier to pass your ownership interest to loved ones, this feature also means the value of your interest in the property is not included for federal gift and estate tax purposes. One downside to holding property as joint tenants is that an owner cannot sell, transfer, mortgage, or otherwise encumber the property without the consent of the other owner(s). To create a joint tenancy the title document must clearly state that you intend to own the property as joint tenants with rights of survivorship.
- Tenancy by the Entirety – only married couples are allowed to co-own property as “tenants by the entirety” in Massachusetts. Your spouse must agree to a conveyance if you hold property as tenants by the entireties. One of the biggest benefits to titling property as tenants by the entirety is that it creates some protection against liability for debts of a co-tenant. When either spouse passes away, the surviving spouse automatically becomes full owner of the entire interest in the real estate because the right of survivorship is inherent in this type of joint ownership. For this reason, spouses often title property as tenants by the entirety as part of an overall probate avoidance strategy.
Contact North Andover Estate Planning Attorneys
For more information, please join us for an upcoming FREE seminar. If you have additional questions about which type of joint ownership is best for you, contact the North Andover estate planning attorneys at DeBruyckere Law Offices by calling (603) 894-4141 or (978) 969-0331 to schedule an appointment.