When it comes to sharing ownership of a property with others, two frequently used options are joint tenancy and tenancy in common. While there are many similarities between the two, it’s important to understand the differences and how they can affect your rights, as well as the rights of your beneficiaries. A financial advisor could help you consider which ownership structure works best for you. Let’s compare joint tenants versus tenants in common, how they differ and when you would choose either one for a shared property.
What Are Joint Tenants?
A joint tenancy is a common form of shared ownership. Joint tenants can be two or more individuals who own property together. These individuals may be married spouses, domestic partners, family members, friends, other relatives and even business partners.
Joint tenancy is established when the property’s deed is issued. This means that the joint tenants will need to purchase the property together, at the same time.
Within a joint tenancy, each tenant owns a shared interest in the property. This means that each tenant can make decisions about the property, including improvements or whether to rent the property out. Joint tenants share in the proceeds of the property and are equally responsible for expenses related to the property.
Joint tenants own equal shares of the property; unlike some other arrangements, a joint tenancy cannot grant a larger share of ownership to one individual.
Joint tenancy also creates what’s called right of survivorship. This means that if one owner passes away, their share of the property is automatically transferred to the remaining owner(s). If there’s only one other owner, he or she will assume full ownership.
With right of survivorship, the remaining owner(s) assume the additional share of ownership without the property needing to pass through probate.
What Are Tenants in Common?
A tenancy in common is another ownership arrangement that is available to two or more individuals. However, there are many differences between a tenancy in common arrangement and joint tenancy. The first is that tenancy in common can be created at anytime. If you purchase a property and later want to add a tenant in common, you can do so. There can also be two or more tenants in common.
With a tenancy in common arrangement, the ownership of the property does not have to be shared. If two tenants in common want to equally share a property, they can do so; however, if they want one owner to have a 90% share and the other to only have a 10% share, that’s also possible.
A tenants in common arrangement does not include an automatic right of survivorship, either. This means that one tenant’s share of the property does not simply transfer to the other owner(s) upon his or her death. Instead, tenants can leave their share of the property to anyone they would like.
Because this arrangement doesn’t include right of survivorship, though, it also means that the property may need to pass through probate. This will depend on who the other owners are and whether the owner who has passed away had a will in place.
How Joint Tenancy and Tenancy in Common Compare
| Joint Tenancy | Tenancy in Common | |
| When it’s created | At purchase | Anytime |
| Number of owners | Two or more | Two or more |
| Degree of ownership | Equal | Can be unequal |
| Right of survivorship | Yes, automatic | No, owners can pass property to anyone upon their death |
| If probate necessary? | No | Possibly |
Bottom Line
When it comes to owning property with another person, it’s an important part of estate planning to understand all your options. If you want (or need) to share ownership in a property with others, two options are to be either tenants in common or joint tenants. Both of these legal designations bring benefits for property owners; however, there are some key differences regarding ownership shares, survivorship and even the purchase timeline that are very important to remember.
Tips on Estate Planning
- Deciding to be joint tenants versus tenants in common depends on a number of key factors, including how you want that property to pass to your loved ones after you die. Be sure to consider these when planning your estate.
- A financial advisor could help you determine which legal designation is right for you. SmartAsset’s free tool matches you with up to three financial advisors in your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
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