Picture this… It’s a birthday party, and there’s one slice of cake left. The birthday girl has already said she’s full, so now it’s down to you and two other people who are eyeing that final sweet, tasty bite. What do you do? Do you swoop in and try to grab the cake before the others have a chance to claim dibs? Do you negotiate, and try to get your fellow partygoers to back off of the slice that you really want? Or do you work together, and agree to share the cake? If so, how do you break it down – does everyone get an equal sliver, or does someone claim more or less of the piece? 

Why all this talk about an imaginary piece of funfetti cake? Because, if ownership is this complicated when it comes to birthday party goodies, imagine how complex it can be when it comes to real property. 

After all, for most of us, a home is going to be one of the biggest investments we ever make. As a property owner, it only makes sense to want to safeguard this enormous asset – whether that means protecting it from creditors as fully as possible, or else ensuring that it will seamlessly pass on to the people who need it down the line. 

Here in our home state of Illinois, key choices about things like estate transitions and asset protection planning start with a vital first decision – the type of ownership you and your co-owners are using to hold title to the property. 

In Chicagoland, and Illinois more broadly, there are largely three prevalent types of shared property ownership. Each type of joint ownership serves a different purpose, and offers various advantages and drawbacks to property owners. Let’s explore these types of ownership – tenancy in common, joint tenancy with rights of survivorship, and tenancy by the entirety – in a little more depth… 

Tenancy In Common

With tenancy in common, two or more parties each concurrently have a distinct, transferable interest in a property. In this set-up, ownership is fairly flexible, with each co-owner largely having the power to transfer their interest whenever they’d like, without needing the permission of the other parties. At the same time, though, each individual’s interest can also be separately subject to creditors. With this type of ownership, an individual owner’s interest is passed in accordance with state and local probate laws upon their death. Broadly speaking, tenancy in common is typically assumed if an ownership arrangement is otherwise left ambiguous or unspecified. 

Some Common Examples:

  • Alex and Jack are best friends who want to share ownership of a vacation home. Alex’s ownership stake is 60%, and Jack’s is 40%. Both want to be able to keep their finances separate and have greater control over their interests, so they hold title as tenants in common. 
  • Sam, Taylor, and Mac are three siblings who assume ownership of their parent’s house. After several years, Taylor passes away as well. Her interest is then given to her heir, in line with state probate laws, making the owners Sam, Mac, and Taylor’s heir. 

Joint Tenancy With Rights of Survivorship

In joint tenancy with rights of survivorship, two or more parties jointly own the property. Broadly speaking, in order to claim joint tenancy, owners must take title at the same time and by the same document, and must have an equal interest in the property (i.e., two owners must each have a 50% interest). The primary function of joint tenancy with rights of survivorship is to allow the property to be transferred out of probate upon the death of a co-owner. With joint tenancy with rights of survivorship, the deceased co-owner’s interest automatically transfers to the surviving co-owner. This can help enormously streamline estate transitions, and ensure that the remaining co-owner can retain control of the property in a difficult moment. As with tenancy in common, joint tenants are not considered to be a single legal entity, and so creditors can attach to one interest, and potentially seize the property as the result of a judgment against just one co-owner. 

Some Common Examples:

  • Business partners purchase a property together, and want to ensure that the asset transfers to the surviving partner upon the death of the first. 
  • An unmarried couple purchases a home, and wants to ensure that ownership is retained in the event that one partner passes away unexpectedly. 
  • A married couple purchases an investment property that is not their primary residence, and wants to ensure that the interest will pass to the surviving partner outside of probate. 
  • After a father passes, he leaves his three children ownership of his vacation home as joint tenants with rights of survivorship. 

Tenancy By The Entirety

In Illinois, married spouses can own property as tenants by the entirety. Tenancy by the entirety is only available to married couples, and only for a homestead property (or primary residence)  owned by that couple. For estate planning purposes, tenancy by the entirety functions similarly to joint tenancy with rights of survivorship. Under tenancy by the entirety, full ownership is immediately conferred to the surviving spouse in the event of the other’s death. Tenancy by the entirety can also offer certain protections from creditors. Namely, a creditor or judgment holder of only one spouse cannot seize or foreclose on the jointly owned property to collect the debt owed. 

Some Common Examples:

  • After getting married, Alex and Sam purchase a home together. Sam incurs substantial credit card debt over time, but the home remains fairly protected from Sam’s individual creditors, because its title is held via tenancy by the entirety. If Sam and Alex were to incur joint debts, however, the creditors of these common debts may be able to put a judgment on the home. 
  • After getting married, Jack and Jackie purchase a home together. Jack passes away, and Jackie assumes full ownership of the property. 

Want to Keep the Conversation Going?

It’s important to remember that when it comes to real estate in Illinois, the way your paperwork is set up can have long-term ramifications for your personal and financial future. Understanding the various ways you can hold title to property in Illinois is a key piece of the puzzle – and there is always more to discuss.

Curious about which form of ownership might be the right fit for your unique circumstances? Want to talk over all things Chicagoland real estate with an experienced legal pro? Don’t hesitate to continue the conversation with the Gunderson Law Firm.

Our attorneys and staff handle a wide range of real estate legal services, including:

  • residential and commercial purchase & sale agreements
  • mortgage conveyancing
  • litigation
  • estate planning & transitions
  • asset protection planning
  • title examinations & disputes
  • foreclosures

For families, investors, and developers alike, the Gunderson Law Firm possesses the expertise and insight necessary to make the most of your time and budget – all reinforced by years of experience and long-term connections throughout Chicago’s real estate, finance, title, and insurance industries. Drop us a line whenever you’re ready to learn more or to schedule your free initial consultation to continue the conversation.