Joint tenancy. Tenants in common. Tenants by the entirety. You might have heard these terms get thrown around, but do you know what they really mean?
Broadly speaking, all three refer to different ways that people co-own property. Each type of ownership offers different levels of protection from creditors, and different rights (such as rights of survivorship upon the passing of a co-owner).
For many people, owning real estate is one of the most important financial undertakings you’ll ever face – and finding the right type of ownership is an important step in the process.
Let’s dig into tenancy by the entirety, tenancy in common, and joint tenancy:
Tenants By The Entirety
Tenancy by the entirety is a valid choice for joint property ownership here in Illinois, though it is not recognized in all states. Laws differ from state to state on tenancy by the entirety; for instance, in some states it may be used for ownership of bank accounts or investments, as well as real estate.
Tenants by the entirety (sometimes abbreviated TBE) is a special type of property ownership shared between married people. In essence, this arrangement immediately confers rights of survivorship to the surviving spouse in the event of the other’s death. So, for instance, if a husband were to pass away, his wife would immediately assume full ownership of the property, or visa versa.
This can be an advantageous arrangement for a number of reasons. For one thing, property owned by tenants by the entirety is passed outside of the probate process, which can save time, stress, and money. For another, tenancy by entirety offers some protection from creditors of individual debts. A creditor or judgment holder of only one spouse cannot foreclose on the property owned by the innocent spouse.
Tenancy In Common
Tenants in common are co-owners of an asset with different, undivided ownership interests.
So, for instance, in such an arrangement, Alex and Taylor may each own 25% of the property, while Sam owns 50%. All three owners could have come to their ownership interests at different times. In this scenario, for example, Taylor might have obtained an interest years later than Sam. There is also a pretty great degree of flexibility allowed in this type of ownership, with owners generally having the freedom to transfer their interest whenever they’d like.
With tenancy in common ownership, an owner’s interest is passed in accordance with probate laws upon their passing. So, the owner may convey their interest to a loved one through their will and testament, or allow it to pass to their heirs as part of their estate, in line with all state and local laws.
Broadly speaking, tenancy in common is generally assumed if an ownership arrangement is left ambiguous or unspecified.
Joint Tenancy (With Rights of Survivorship)
In joint tenancy with rights of survivorship (or, sometimes, the mouthful “JTWROS”), two or more people own an asset, each with an equal interest. So, if two people co-owned as joint tenants, they would each own 50% ,four people, 25%, and so on.
Joint tenancy with rights of survivorship, like tenancy by the entirety, allows the property to be transferred out of probate upon the death of a co-owner. In this case, the surviving owner(s) immediately assume full ownership. This arrangement is often associated with real estate ownership, but may also apply to financial accounts, investment portfolios, and business interests.
One thing to keep in mind? Unlike tenants by the entirety, joint tenants are not regarded as a single legal entity. This means that a creditor can seize the property as the result of a judgment against one co-owner (though in this event, the other parties must be compensated for their interest in the property).
Keep the Conversation Going
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 a legal pro? The Gunderson Law Firm can help!
Our experienced team handles:
- residential and commercial purchase & sale agreements
- mortgage conveyancing
- property tax appeals
- landlord/tenant disputes
- pre-marketing planning consultations
- leases, including title examinations and advice on insurance and financing
For developers, investors, or families looking to buy their forever home, 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, and insurance industries. Drop us a line today to learn more or to schedule your free initial consultation.