Q: Should my partner and I purchase our home as a joint tenancy or TIC? We are unmarried; He has kids from prior marriage.
We both want to be able to remain in the home, make improvements, or sell if the other passes away. He wants to ensure his children to receive his share of the proceeds if the house is sold after his death. We may get married and have more children in the future. What is the best ownership structure for us, at least for the initial purchase of the home ?
TIC, or put it in a Trust.
Joint tenancy would mean that when A dies, B gets it all. B may not remember or want to give assets to the children of A. B might just meet a new person after the funeral and forget A completely! It happens, and poor A's kids get left out in the cold.
A TIC now, or a Trust, and update it if you have kids together.
Joint tenancy means each of you will own an undivided one-half interest in the property, and it includes the right of survivorship. Right of survivorship means if one of you should pass away, the person who passed would automatically transfer his or her ownership to the surviving person,. This would cut out his children from inheriting his one-half interest.
A tenancy in common means each of you will own an undivided one-half interest in the property. If one of you passed away, the decedent's interest would automatically pass to his or her heirs. In your case, if your friend died his children would inherit his undivided interest in the house. You could name an heir in your will or you could transfer title upon your death to your closest living relative(s). Your heir(s) or your friend's heirs also would have the legal right to petition a court for dissolution of the tenancy in common and force the sale of the property.
A: The more important question is whether the two of you have trusts and other estate planning documents to protect your loved ones (and you) in both death and incapacity (car accident, Alzheimer's, dementia, etc.) The deed to a home will not sufficiently protect all of your assets in the event of either of you passes away or becomes incapacitated. But, if you want to focus solely on a home, your deed will need to contain very specific language about the right to live in the home after the first of you passes away, as well as any other desires you may have. If you put the title in joint tenancy then, as soon as one of you passes away, the survivor will inherit 100% ownership of the entire home and the deceased person's loved ones will get nothing. With tenancy in common, one of you can sell his/her/their half of the property and the other person is stuck owning property with someone they did not select. So, as you can see, this is a bit more complicated than simply titling real estate. I strongly suggest you contact an estate planning attorney and have an estate plan prepared so, regardless of what happens in the future, your wishes will be known and your assets will go to the right people. Best wishes!
Both have important legal consequences:
Joint Tenancy: If one of you dies, the other becomes the sole owner of the property by operation of law.
Tenancy in Common: If one of you dies, the other still only owns 50%, and the deceased owner's share passes to his/her heirs. The surviving spouse would have to share the home with the heirs, buy them out, or sell the home to give them half of the value.
A third option would be for you two to execute a Living Trust, and deed the house into the Trust in order to plan for the inevitable conflicts that may arise with a blended family. The Trust would allow you to structure more complicated arrangements for how you want the house treated and distributed upon the death of one or both of you, and can prevent the partner dying last from cutting out the heirs of the partner who dies first.
A: I agree with the other responses, but would add that it's important for the two of them to have an agreement which governs their rights and obligations with respect to their shared ownership of property. Like a partnership agreement, it would have a stated term (length of years) and would govern who gets to live there, how the expenses are shared, what happens when one party fails to live up to the agreement, and what happens when the parties want to go their own ways (perhaps through a buyout option given to the one who wants to keep the property). The agreement could be between individuals or trusts depending on how the parties want to hold title to the property.
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