Tenants-in-Common Probate: What You Need to Know

When you co-own property as tenants in common, one key factor to consider is how probate impacts your share after you pass away. Unlike other ownership types, your portion doesn’t automatically go to the surviving owners it becomes part of your estate and enters the probate process. Grasping this is vital for ensuring your intentions are fulfilled and preventing challenges for your heirs.

What is Tenancy in Common?

Tenancy in common is a form of property ownership where two or more individuals hold distinct, undivided shares of a property. Each owner possesses a specific percentage of the property, which can be equal or unequal, and has the right to transfer or bequeath their share independently. Unlike other forms of joint ownership, tenancy in common does not include a “right of survivorship,” meaning that upon an owner’s death, their share passes to their heirs rather than automatically to the surviving co-owners. This arrangement allows for flexibility in ownership and estate planning, as each tenant can manage their portion separately.

How Tenancy in Common Works

In a tenancy in common, each co-owner holds a separate title to their individual share of the property, allowing them to manage, sell, or transfer their portion without needing consent from the other owners. The shares can be unequal, and each owner is responsible for their portion of property taxes, maintenance, and other expenses. Importantly, since there is no right of survivorship, when a tenant in common dies, their share does not automatically transfer to the surviving co-owners. Instead, it becomes part of their estate and is distributed according to their will or state intestacy laws. This structure provides each owner with autonomy over their share while sharing the property’s overall use and benefits.

Who Inherits Property Owned as Tenants in Common?

When a tenant in common dies, their share of the property passes to their designated heirs or beneficiaries as specified in their will. If the deceased owner did not leave a will, their share is distributed according to the state’s intestacy laws, which typically prioritize spouses, children, or other close relatives. Unlike joint tenancy, the surviving co-owners do not automatically inherit the deceased owner’s share. This means the property may be inherited by individuals outside the original ownership group, potentially leading to co-ownership with new parties.

How Does Probate Work for Tenancy in Common?

Probate for tenancy in common is the legal process that occurs when a co-owner of a property dies, and their ownership share needs to be distributed. Unlike joint tenancy, tenancy in common does not include a right of survivorship, meaning the deceased co-owner’s share does not automatically pass to the surviving co-owners. Instead, that share becomes part of the deceased person’s estate. During probate, a court oversees the validation of the deceased’s will (if one exists) and ensures the share is distributed to the rightful heirs or beneficiaries according to the will or, in the absence of a will, state intestacy laws. This process can take time, incur legal fees, and become complex if the estate is large or disputes arise among heirs.

Is Probate Always Required for Tenancy in Common?

No, probate is not always required for tenancy in common. While it is the standard process for handling a deceased co-owner’s share, there are exceptions and alternatives that can bypass it. For instance, if the value of the deceased’s share is below a certain threshold, some states allow simplified probate procedures or even exempt it from probate entirely. Additionally, if the property share is held in a living trust, it can pass directly to the beneficiaries without going through probate. Other options, like transfer-on-death deeds (available in certain states), can also enable the share to transfer automatically upon death, avoiding the probate process.

How to Avoid Probate with Tenancy in Common

There are several effective strategies to avoid probate for a tenancy in common share:

1. Living Trusts:
   By placing their property share into a living trust, the owner can designate beneficiaries who will receive the share directly upon their death, bypassing probate entirely.
2. Transfer-on-Death Deeds:
   In states that permit it, a transfer-on-death deed allows the owner to name a beneficiary who automatically inherits the share upon the owner’s death, avoiding probate.
3. Joint Tenancy with Right of Survivorship:
   Converting the tenancy in common to a joint tenancy with right of survivorship means that when one co-owner dies, their share automatically passes to the surviving co-owners, skipping probate.
4. Gifting:
   The owner can transfer their share to someone else during their lifetime as a gift, removing it from their estate and eliminating the need for probate upon their death.

Each of these methods carries its own legal and tax considerations, so it’s wise to consult an estate planning attorney to determine the best approach for your specific situation.

Advantages and Disadvantages of Tenancy in Common

Tenancy in common is a form of property ownership where multiple individuals hold title to a property together. Below is a clear breakdown of its key advantages and disadvantages to help you understand this ownership structure.

Advantages of Tenancy in Common

1. Flexible Ownership Shares: Co-owners can hold unequal percentages of the property, allowing each person to contribute based on their financial input or agreement. For example, one owner might hold 60% while another holds 40%.
2. Independent Transfer of Shares: Each owner has the freedom to sell, gift, or transfer their share without needing approval from the others, providing individual control over their portion.
3. Shared Investment Opportunity: This arrangement allows multiple people to pool resources to buy property, making it an attractive option for investors or families who want to share ownership.
4. Estate Planning Flexibility: Owners can decide who inherits their share by specifying it in their will, giving them control over its future rather than it automatically passing to co-owners.

Disadvantages of Tenancy in Common

1. Probate Requirement: When an owner dies, their share doesn’t automatically transfer to the surviving co-owners. Instead, it must go through probate, a legal process that can be slow and expensive.
2. Potential for Disputes: Co-owners might have different goals for the property—like whether to sell, rent, or maintain it—leading to disagreements that can complicate decision-making.
3. No Right of Survivorship: Unlike joint tenancy, tenancy in common doesn’t include an automatic transfer of a deceased owner’s share to the remaining owners. It passes to the deceased’s heirs or as directed in their will, which may disrupt the ownership dynamic.
4. Complications with New Co-Owners: If one owner sells their share, the others may end up co-owning the property with someone new, potentially someone they don’t know or agree with.

Alternatives to Tenancy in Common

1. Joint Tenancy

• Description: In joint tenancy, all owners hold equal shares of the property with an undivided interest in the whole. The standout feature is the right of survivorship: when one owner dies, their share automatically passes to the surviving owners, not to their heirs.
• Key Difference: Unlike tenancy in common, where shares can be unequal and inherited, joint tenancy ensures the property remains with the surviving co-owners, bypassing probate for the deceased’s share.

2. Tenancy by the Entirety

• Description: This is a form of joint tenancy exclusively for married couples. It also includes the right of survivorship, meaning the surviving spouse automatically inherits the deceased spouse’s share.
• Key Difference: It provides extra legal protections, such as shielding the property from creditors of one spouse in many cases, making it a more secure option for married couples compared to tenancy in common.

3. Community Property

• Description: Available in certain U.S. states, community property laws allow married couples to own property together, with each spouse typically owning half. Upon death, the deceased spouse’s share can pass to heirs or as directed in a will.
• Key Difference: Unlike tenancy in common, this is tied to marital status and state-specific laws, and it usually requires probate for the deceased spouse’s share unless held in a trust.

4. Ownership Through a Trust or Business Entity

• Description: Property can be owned via a trust (e.g., a living trust) or a business entity like a partnership or corporation. A trust, for instance, can transfer property to beneficiaries without probate.
• Key Difference: These are more complex than tenancy in common and are often used for estate planning or business purposes, offering benefits like probate avoidance or liability protection.