Many people co-own assets with other people or entities. When setting up the co-ownership, people often worry about what percentage or fraction of the property each co-owner owns of the property, but what many people do not realize is that the type of co-ownership of the property can be just as important as their percentage of ownership they share of the property. The type of co-ownership can determine many things, but most importantly, how a deceased owner’s shares are passed to other persons or entities upon the owner’s death. For assistance with your specific case, contact our experienced Troy, MI estate planning lawyer today.
For instance, one kind of joint ownership of property is called tenancy by the entireties. This type of joint ownership is only available to people who are legally married to each other. If two people are married and become co-owners of an asset, tenancy by the entireties is the default type of co-ownership, but specific language can also be used to clarify this type of ownership. In this type of ownership, both spouses own the property equally and upon the passing of one spouse, the other spouse automatically inherits the deceased spouse’s interest without the need for Probate or other documents such as a trust.
The “default” way to own property with another person or entity in Michigan is called tenants in common. This type of ownership can be specifically stated in the ownership designation of the asset, or, in the absence of any language about other types of joint ownership between individuals who are not married, this becomes the default type of joint ownership of the asset. In tenants in common, when one owner passes away, their share of the asset goes to their estate, and not the other co-owners of the property. Even if the other co-owners of the property are the beneficiaries of the estate, Probate will be necessary to transfer the decedent’s interest in the asset to the beneficiaries. However, one benefit of tenancy in common is that not all owners have to have equal interest in the assets and various owners can own different shares of the asset.
Another type of co-ownership is called joint tenancy. In a joint tenancy, each joint tenant shares in possession of the entire estate, and each is entitled to an undivided share of the whole. Joint tenancy is only available for co-owners who are people and not entities. The principal characteristic of joint tenancy is the right of survivorship. Upon the death of one joint tenant, the surviving tenant or tenants take the whole estate without the need for Probate to do so. However, joint tenancy can be severed by the act of any single co-owner by conveying their interest in the asset, or by a court order for levy or sale of execution against a co-owner. If one of these instances occurs, joint tenancy then changes to a tenants in common. Unlike tenants in common, all co-owners in a joint tenancy have equal ownership of the asset, and dividing ownership interests up so owners own different percentage shares of the property is not possible.
The last type of co-ownership of assets is called joint tenants with full rights of survivorship. This type of co-ownership shares all of the characteristics of joint tenancy, with one key difference. In this type of co-ownership an owner can transfers or sell their interest to the property for their lifetime to a 3rd party. In this instance if one owner transfers their interest in the property to another party, that party only has that interest until the transferring owner dies, at which point that interest then transfers to the original surviving joint tenants, and the transferee’s interest in the property is extinguished.
Co-ownership of assets can be quite complex and, if not established properly, can be very problematic. If you are thinking about purchasing an asset with another person or entity, or changing title to an asset to add other co-owners, contact Gudeman & Associates, P.C. today so that we can make sure the structure of the joint ownership meets the needs and goals of all parties involved.
