How Should Your Kids Hold Real Property Upon Your Death?
So you’ve made the decision to do your estate planning. Great! One of the most important decisions you’ll make is how to pass on your home and other real property. In addition to determining how you will pass your home (by will, beneficiary deed, or trust), you will need to determine how your children will jointly own the home. There are two options to choose from, which will be designated in your will, beneficiary deed, or trust: (1) Tenants in Common or (2) Joint Tenancy with Rights of Survivorship. Let’s discuss these two options.
Tenants in Common
Tenants in Common is a means of jointly holding property whereby two or more owners hold the same land, with each owner being able to freely sell or devise their share in the real property. Each child, upon receiving title to the home, is free to individually sell their ownership share in the property. The joint owners do not need to act together or sever ownership before selling their share. Also, each child may freely devise their ownership share in a will, trust, or other legal instrument. If a child passes, his ownership share in the property will need to be probated. If you’d like your child to hold the property as Tenants in Common, you can have your children own equally or each could own different percentages.
Joint Tenancy is when two or more owners take identical interest simultaneously by the same instrument and with the same right of possession. This means that you cannot give your children differing ownership percentages in the property—they must all receive equal shares. Before selling an interest in the real property, a child must either convince all other children to sell together or sever his or her ownership under state law. Also, each child cannot freely devise their equal share by will, trust, or other instrument since the right of survivorship exists. This means that, upon the passing of one child, the remaining living children will assume their deceased siblings share. The upside to this is that the decedent child’s ownership share will pass by operation of law without probate (unlike Tenants in Common). Only the last remaining child to survive may devise the property by will, trust, or other legal instrument.
Which option is best for you will depend on your circumstances. Make sure you speak with your estate planning lawyer, like an estate planning lawyer in Belgrade, MT, about your options.
Thanks to Silverman Law Office, PLLC for their insight into how your children can divide your property following your passing.