When two people intend to jointly own a piece of real estate, they have two primary options for doing so: (i) they can hold the property as “tenants in common;” or, (ii) they can hold the property as “joint tenants with rights of survivorship.” While these terms may sound archaic and overly-complicated (and, to a large extent, they are), there is an important distinction between the two, and spouses and others who intend to jointly own real estate must make an informed decision about which option they choose.

What Does it Mean to Hold Real Estate as “Tenants in Common”?

If you co-own a piece of real estate as a “tenant in common,” this means that you hold a specific percentage of the ownership interest in the property. However, it does not mean that you own a specific portion of the land, building, or other improvements. For example, if two people own a tract of land as equal tenants in common, this means that each owns a 50% interest in the entire property, not that each owns a specific portion of the land.

Another key aspect of tenancy in common has to do with what happens to the owners’ interests in the property at the time of death. Under South Carolina law, an ownership interest held by a tenant in common passes to his or her heirs or named beneficiary(ies). Unless the ownership interest is held in a trust at the time of death, this means that it is subject to probate. Once the ownership interest is successfully transferred, then the new owner will be a tenant in common with the surviving owner.

What Does it Mean to Hold Real Estate as “Joint Tenants with Rights of Survivorship”?

Owning a real estate as “joint tenants with rights of survivorship” differs in some important ways. Most fundamentally, a joint tenant’s interest in the subject property does not transfer to his or her heirs or named beneficiaries upon death. Instead, the joint tenant’s interest automatically transfers to the other co-owner. This automatic transfer avoids the probate process, which makes it more desirable under many (but not all) circumstances.

While joint tenancy offers the benefit of avoiding probate, it has some potential disadvantages as well. These include:

  • Exposure to Creditor Claims – If one joint tenant goes into debt, his or her creditors may be able to force a sale of the property even if the other joint tenant is not jointly liable.
  • Limited Estate Planning Options – With tenancy in common, co-owners can change their final wishes regarding their ownership interest in the property at any time. With joint tenancy, the only option is for each joint tenant’s interest in the property to automatically transfer to the other at the time of death.
  • Gift Tax Liability – While not an issue for spouses, in certain other cases (i.e. when establishing a joint tenancy with your child), creating a joint tenancy with rights of survivorship can trigger a federal gift tax liability.
  • Equal Access to the Property – Joint tenants have full and equal access to their jointly-owned property, whereas the access rights of tenants in common can be limited and delineated. While, again, typically not an issue for spouses, this can create problems in other scenarios.

Which Option Should You Choose?

When deciding how to co-own real estate, whether with your spouse or someone else, it is important to make an informed decision. If you are unmarried, this does not automatically mean that tenancy in common is the best options. Conversely, while most married couples may choose joint tenancy with rights of survivorship, your individual family and financial circumstances may warrant a different approach.

Keep in mind, whichever option you choose, you can always change your mind (as long as you and your co-owner are on the same page); however, this can be somewhat of an involved process. For example, if you live in Charleston County and you change the nature of your co-ownership of your family home, you will be asked to re-confirm that your home is your primary residence. This involves submitting state and federal tax records, copies of you and your spouse’s (or other co-owners) driver’s licenses, and various other forms of documentation. Regardless of where you live, you will also need to record the change with the appropriate clerk’s office; and, if you have an estate plan, you will likely need to update your plan to reflect the change as well.

What Happens if One-Owner Sells His or Her Interest in the Property?

Tenants in common and joint tenants with rights of survivorship can sell their interest in the subject property at any time. By default, after the sale, the new owner will be a tenant in common with the remaining owner even if the property was held in a joint tenancy. However, since both forms of ownership involve the ownership of an “undivided” interest, a sale will not subdivide or partition the property. Subdividing or partitioning a parcel of real estate is a different type of transaction that involves its own unique procedures and documentation.

How Can I Figure Out if I am a Tenant in Common or a Joint Tenant with Right of Survivorship?

In order to figure out if you are a tenant in common or a joint tenant with right of survivorship, you will need to review the recorded title documents for your property. You should not rely solely on a copy of the title that is in your possession, as it is possible that the other owner could have executed a transaction affecting his or her ownership interest (and potentially yours if you were joint tenants) without our knowledge. If you need help, or if you have other questions about holding title to real estate in South Carolina, you can contact us for more information.

Contact Watts Law Firm PA in Summerville, SC

If you have questions and would like to speak with a wills attorney, we encourage you to contact us for a confidential initial consultation. To request an appoint at our Summerville, SC law offices, please call 843-851-7050 or inquire online today.