If you own property jointly or are considering it, it is imperative that you understand the different co-ownership options. Often when deciding on the type of co-ownership, one is focused on the value of property being owned and who they will own this property with. However, it is equally important to look at the potential liabilities they may incur from the co-ownership agreement.
There are three primary types of co-ownerships:
* Tenancy-in-common (TIC) - is an arrangement in which each owner owns a divided fractional share of either commercial or residential property. Each owner can own an equal or differing percentage as well as sell, gift, or mortgage their portion of the interest in said property. Each owners interest in the property is safe from the others creditors as long as the creditors lawsuit is not related to the property itself.
* Joint tenants with right of survivorship (JTWROS) - is when two or more people own an equal right to the property or asset. Each tenant is afforded survivorship rights in the event of the death of the other account holder(s). Any one tenant may be held liable for the entirety of the debt owed to a creditor in regard to the property. This form of co-ownership cannot be included in an estate or transferred through a will as it passes uncontested to the surviving tenant(s) when the first passes.
* Tenants-by-the-entirety (TBE) - allows for spouses to jointly own property as a single legal entity. It also protects the property which is owned from being claimed by a creditor seeking compensation against one of the spouses. Each spouse has an undivided equal interest in the property. Should one spouse pass, the property would automatically transfer to the surviving spouse. TBE is only allowed by about half of the states in the U.S.
While each of these co-ownership entities has some protective, legal, or estate benefits, none of them can insulate you personally if the liability occurs with the property itself. It is far safer to co-own assets through a protective entity such as a limited partnership or an LLC which can protect the individuals from personal liability should litigation connected to the property itself ever arise.
Contact The Presser Law Firm, P.A. for a complimentary preliminary consultations. Making the best legal decisions now can help you be prepared to protect your finances against creditors or unforeseen liabilities.