Types of Tenancies: How You Should Take Title in Real Estate
If you are buying a home or other real estate, your attorney will have asked you how you want to take title. If she didn’t, or if she did and you didn’t know how to answer her, don’t worry. In that case, she will have asked you other questions to determine how you should take title. Example of some of these questions would be: Are you married? Is your spouse going to be on the deed with you? Will you be living in this property? How is your co-buyer related to you? What do you want to happen to your ownership in the property when you die? This information will help your attorney determine what the best type of tenancy is for you.
Assuming you are not taking title in the name of a company, there are essentially four ways to take title in real estate in Illinois. The information below will help you determine which form of tenancy best for you:
- This is an easy one. If you do not want anyone else on title with you, then the property will be deeded to you alone.
- What does this mean after your death? If you have not prepared an estate plan which disposes of the property, it will go to your heirs at law.
B. Tenants by the Entirety
- This is the strongest form of title ownership available in Illinois.
- It is only available to married couples.
- It is only available for your primary residence.
- It provides a great deal more protection from creditors than other forms of tenancy.
- What does this mean after your death? When one spouse dies, the home automatically becomes the property of the other spouse. In the event both spouses die at once, if they have not prepared an estate plan which disposes of the property, it will go their heirs at law.
C. Joint Tenants with Right of Survivorship
- This form of tenancy is available to groups of two or more people.
- The property can be your primary residence, a second home, investment property, or commercial property. It doesn’t matter.
- What does this mean after your death? If one joint tenant dies, his share goes to the remaining joint tenants. In other words, if there are only two joint tenants and one dies, the deceased owner’s interest goes to the other joint tenant. If there are three or more joint tenants and one dies, the deceased owner’s share is divided between the surviving joint tenants. When the last surviving joint tenant dies, if he has not prepared an estate plan which disposes of the property, it will go to his heirs at law.
D. Tenants in Common
- This is probably the least common form of tenancy used in Illinois, but it has its benefits.
- Tenancy in common can be used to take title in your primary residence, a second home, investment property, or commercial property. It doesn’t matter.
- This form of title ownership is often used when two or more partners buy real estate as an investment, and for some reason, they have decided not to form an entity to own the real estate.
- Tenants in common own a percentage interest of the property. For example, two tenants in common may own 50% each. Four tenants in common may own 25% each. HOWEVER, the shares do not need to be equal. For example, one tenant in common can own 50%, a second can own 30%, and the third could own 20%. Note that just because you say you own a portion, say 25%, does not mean you physically get a fourth of the actual lot the property is on.
- Individuals can sell or transfer just their interest. So if you and Suzy Q buy real estate as tenants in common, Suzy Q can sell or transfer her share to Joe Schmoe, and now you and Joe Schmoe will be tenants in common
- What does this mean after your death? If you own property in tenancy in common with someone else, and you die, your share is transferred per your estate plan (or if you did not prepare an estate plan disposing of the property, your share is transferred to your heirs at law). So your share may end up with your spouse, your kids, or whomever you left it to. Your heirs would then be co-owners of the real estate with the other tenant in common.
If you purchase property in one form of tenancy, it can always be changed later assuming all owners on title cooperate. So if you take a look at your deed and realize you did not end up with the type of tenancy that best suits your needs, or if your needs have changed, we can still take care of it. We’re just a phone call or e-mail away!