Sandra Reed’s Life Care Planning: What you need to know about sharing property ownership

Know How This Relationship Works – Or Doesn’t

Attorney Sandra W. Reed answers your life planning questions.

Attorney Sandra W. Reed answers your life planning questions.

A couple’s estate planning often assumes that the last to die will leave all the then-existing property to the children. This works simply and beautifully if the property is fungible, meaning that the units of property are mutually interchangeable. Money is fungible. Real estate is not. So if your family operates more like the Ewings than the Partridges, this scheme can lead to trouble with a capital “T.”

The Definition of Co-Tenancy

Texas allows joint ownership of real estate. When it is so owned, the relationship is called a “co-tenancy.” When non-spouses are involved, the owners are either tenants-in-common or joint tenants with rights of survivorshipThe Texas Estates Code §101.002 provides that unmarried persons owning property together are presumed to own it as tenants-in-common rather than as joint tenants with rights of survivorship.

If the will provides for the children to “share and share alike” or “share jointly,” this language creates a tenancy-in-common. If the will uses words to the effect that the children are to “have the rights of such tenants at common law, including the right of survivorship,” this creates a joint tenancy with rights of survivorship, or JTROS.

The major difference between a tenancy-in-common and a JTROS is what happens to the property upon the death of one of the co-tenants. If the relationship is a tenancy-in-common when one co-tenant dies, his or her share goes to whomever was named in a will to take it or to whoever inherits under the intestacy laws. In a JTROS, when one of the tenants dies, the other tenant will own 100 percent of the property.

If more than one tenant is still living, the remaining tenants then own the undivided interest of the deceased as well as their own undivided interests. The ownership of the JTROS ownership interest is determined this way, even if the deceased had named someone else to take his or her interest in the property in a will. In other words, the JTROS relationship trumps the will.

Rights of Co-Tenants

The co-ownership gives each owner the right to use, occupy and possess each part of the property, but they may not do so to the exclusion of the other co-owners. Because of that, they are said to own an “undivided interest” in the property.

However, tenants-in-common do not automatically have a right of survivorship. In other words, one tenant does not have the right to the whole property upon the death of another tenant unless the decedent gifted or willed the interest to the surviving co-tenant.

Consider this example: Jack, Jill and Jane own a vacation house together. Their ownership interests are co-tenancies. This means they all have the same right to occupy the vacation house at any time and to use any part of the vacation house at any time. Jack cannot show up at the house for the 4th of July weekend and refuse to let Jill and Jane use the property that weekend. The same applies to Jill and Jane. Of course, the three of them can agree to take turns using the property at certain times and for the peaceful co-existence of their relationship, they should. But they have no legal obligation to do so.

Jill can decide to make improvements to the property without having obtaining consent from Jack and Jane as long as what she does won’t injure them or interfere with their rights. Unless the three of them agree beforehand to share the costs of the improvements, however, Jack and Jane will not be obligated to contribute to the cost unless the improvement is both necessary and beneficial.

Responsibilities of Co-Tenants

Jack, Jill and Jane, both individually and collectively, have the responsibility to preserve and protect the property. If one of them expends funds to do so, he or she has the right to seek reimbursement from the others for their share of the obligation.

Co-tenants are responsible for paying a common debt of the property, such as a mortgage or property tax payments. If Jack and Jill fail to pay a mortgage payment or taxes on the property, Jane has the responsibility to do and then seek contribution from Jack and Jill for their share.

Right to Transfer a Co-Tenacy Interest

Even more disturbing is that any one of the three — Jack, Jill or Jane — can at any time transfer his or her own interest to someone else without the other’s consent. That means Jack can transfer his interest to his lifelong friend Mark, whom Jill and Jane detest, and suddenly they share ownership with someone they despise.

Termination of the Co-Tenancy

Can any one one of the three owners terminate their co-tenancy at will? The answer is yes. They may do so at any time by “partitioning” the property, either through agreement or through a court order. If they accomplish the partitioning by agreement, partitioning can divide the property according to the value or the area. The court will generally the property into divide by value into fair and equal parcels.

Alternatives to Avoid Co-Tenancy

Whether your family has a J.R. or simply might not contentedly share the ownership of property, consider these alternatives to creating a co-tenancy at your death. One way is to partition the subject property into the same number of units as the number of beneficiaries you want to favor.Then make a specific bequest of one unit to each beneficiary.  If you don’t want to designate which partitioned unit goes to which one of the group, let the executor have the power to decide.

Another alternative is to have your will instruct your executor to sell the property and divide the proceeds equally among the designated beneficiaries, thus turning the non-fungible real estate into a fungible asset.

Sandra W. Reed is an attorney practicing in Glen Rose, of counsel with the Fort Worth elder law firm of Katten & Benson. Phone: 254-797-0211;  email: swreed2@yahoo.com

 

 

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