Q: What does two people NOT as tenants in common but rights of survivorship mean?

A: This answer is ONLY for real estate in Oregon - so if this is the title for real property in Oregon, this language means that when one owner dies, the other owner instantly becomes the owner of the property because they are the survivor. In contrast, tenants in common would mean that each owner owns a share of the property. If the percentage of ownership is not specified it will be presumed that the owners have equal shares. So two owners would each own 50% of the property unless a different percentage is specified on the deed. (You could put 60/40% or any percentage that the owners agree to.) In this latter case, where ownership is tenants in common, when one of the two owner's dies, the property owned by the deceased owner becomes the property of their estate and passes to their heirs or devisees.

Either scenario can cause unanticipated problems. It is really important to talk to an attorney about various options for how to title property and what your goal is with respect to the property. You want to discuss the debt situation of all parties involved because you want to avoid creditors of one investor taking the property to satisfy that person's debts.

You want to make sure you understand tax consequences when an owner dies. There is a step up in basis when an owner dies as to to the property which can mean less taxes when the property is later sold. This is tricky because even if the property is held by right of survivorship, there can still be a step up in basis. Just know that a step up in basis is desirable and will save a lot of money in taxes when the property is later sold.

People often make the mistake of having a loved one who is dying sign a deathbed deed to give them the property thinking that this avoids the cost of probate. Well, while this might avoid probate, it results in a lifetime "gift" of the property so that the property transfers with the owner's original basis (cost of what the owner originally paid for the property) and then when the property is sold, you only get to use the original basis/purchase price as the cost when calculating capital gains taxes. Alternatively, if the owner hadn't gifted the property but just died and left the property to pass via a Will to their heirs, or had used a deed with their name and their heir's names, with a right of survivorship, there would have be a step up in the cost basis to the value of the property at the time of their death. When there is a step up in basis, and the property were sold shortly after the owner's death, the capital gains tax would be zero. (Because the cost basis and the price at the time of the sale would be the same amount.)

The bottom line is that there can be various consequences with how you title real property and how you transfer real property that require the expertise and advice of a lawyer to figure out. Anytime you are dealing with real estate, invest in getting a consultation with a lawyer because the cost of the advice is almost always cheaper than the cost of the problems you will otherwise create.