Tenancy in Common and Probate: An Overview
Property ownership comes in various forms, and one of the most common is tenancy in common. However, this setup doesn’t necessarily sidestep probate— the legal process involved when someone dies.
This blog aims to shed light on the relationship between being tenants in common and the probate process.
What Probate Entails
Probate involves legal procedures to transfer assets from a deceased person to the beneficiaries. The process also allows creditors to claim payments from the decedent’s estate and ensures that all tax obligations are met.
It’s a lengthy and sometimes costly process, which is why people often strive to avoid it. Unfortunately, being tenants in common won’t automatically shield you from probate unless you take additional measures.
Understanding Tenancy in Common
In a tenancy in common, multiple individuals own property together, but not necessarily in equal shares. For instance, one tenant might own a 30% share while another holds a 70% stake. Despite this, all tenants have the right to use the entire property. It’s an attractive option when co-owners have contributed different amounts to the property investment.
The Power to Transfer Ownership
Each tenant has the ability to transfer their ownership stake to another person, either while they are alive or after death, without requiring consent from the other co-tenants. This transfer could be part of their estate plan or happen according to the laws of intestacy if no will exists.
How Joint Tenancy Differs
Joint tenancy is another form of co-ownership but comes with the right of survivorship. This means that if one joint tenant dies, their share automatically goes to the surviving tenant(s). Unlike tenants in common, joint tenants must hold equal shares, and none can sell or encumber their share without the consent of the others.
The Decedent’s Sole Ownership Stake
If a tenant in common dies, their share of the property enters the probate process in one of two ways:
- Through a will: If the deceased left a will, their share goes to the beneficiaries named in that will.
- Through intestacy: If no will exists, state laws dictate who inherits the share, usually the spouse or children.
A New Tenant You Didn’t Choose
The end result is that you might find yourself co-owning property with someone you’ve never met, depending on who inherits the deceased tenant’s share.
A Look at Revocable Living Trusts
Another way to avoid probate is to place the property into a revocable living trust. This means that the property passes directly to the beneficiaries named in the trust, avoiding court involvement altogether.
Mortgage Implications
If the property is under mortgage, the probate process might also involve settling the decedent’s debts. However, if the mortgage was a joint agreement, the responsibility to pay it off shifts automatically to the surviving tenant.
What Are Your Options?
If you end up co-owning property with someone you’d rather not, you have several options. You could negotiate to sell the property and divide the proceeds. Alternatively, you could buy out the new tenant’s share. Another option is to file a partition action in court to force a sale and distribution of proceeds.
Take Action
Being a tenant in common offers some flexibility but doesn’t automatically protect you from probate. Therefore, it’s crucial to consult with an estate planning attorney to explore all your options for protecting your assets and ensuring a smoother transfer to your beneficiaries.
If you’re ready to do just that, call us at 918-615-2700 to schedule a consultation at our Tulsa, OK estate planning office. Our Oklahoma City location can be reached at 405-843-6100, and you can use our contact form if you would prefer to send us a message
After helping his own family deal with a lengthy probate and the IRS following his father’s untimely death in a farm accident, Larry Parman made a decision to help families create effective estate plans designed to reduce taxes, minimize legal interference with the transfer of assets to one’s heirs, and protect his clients’ assets from predators and creditors.
Latest posts by Larry Parman, Attorney at Law (see all)
Story originally seen here
