What is a tenancy in common?
It is
the ownership of an asset by two or more persons, who own the
asset in undivided interests that may be unequal.
Joint tenancy, on
the other hand, involves equal ownership of the undivided interests.
What else is different about tenancy in common?
1. When a tenant in common dies, his or her
share of the asset is subject to his or her will or
trust, or, if there is
no will or trust, to intestate succession. But when a joint tenant
dies, his or her interest in the asset vests in the surviving joint tenant
or joint tenants.
2. A tenancy in common may be subject to
probate,
but joint tenancies are not subject to probate.
3. A tenancy in common may involve interests that
are not equal: One co-tenant may own 75 percent of the asset, and the
other co-tenant would own 25 percent.
Does a will or trust have
any control over tenancy in common property?
Yes. An interest in a tenancy in common may be given to others through
a will or trust.
How does tenancy in common affect capital gains
taxes? Only the interest owned by the deceased
co-tenant can be stepped up for capital gains purposes, subject to a limit
of $1.3 million for non-spouses, and $4.3 million for spouses.
Advantages of a tenancy in common:
1. The interest in the asset that is owned by the
decedent is subject to the decedent's will.
2. Unequal interests can be owned by the co-tenants.
Disadvantages of a tenancy in common:
1. The interest owned by the decedent may have to be
probated.
2. If the shares are unequal, that fact must be stated in the title to
the asset, or the ownership will be presumed under state law to be equal.
What does tenancy in common look
like on a deed?
The grantee of a typical deed in tenancy in common might look like this:
John Smith grants to:
Joseph Jones, an undivided one-third
interest, and to Robert Johnson, an undivided two-thirds interest, as
tenants in common.
If they owned the property equally, the
deed would read:
Joseph Jones, an undivided one-half
interest, and to Robert Johnson, an undivided one-half interest, as tenants
in common.
