Owning real estate continues to be a very popular investment vehicle for individuals and couples alike. One attractive feature of investing in real estate is that investment property can also double as a personal residence. In other cases, real estate investments may be rental, recreational, commercial, or farm properties. Failing to understand how you legally own your real estate and how it will be passed on to your loved ones can lead to unintended, and often negative, consequences. You can leave property to your loved ones as:
- Gifts In Your Will
- Gifts from a Trust
- Gifts Using Transfer-on-Death or Beneficiary Deeds
- Gifting Real Estate to Multiple Individuals
Tenancy
Tenancy in common is a frequently used option for joint ownership among individuals who are not related by marriage. This type of real estate ownership allows each joint owner to access and enjoy use of the entire property even though they may own only a fraction of it. However, if a joint owner dies, that person’s share will pass to their own heirs or beneficiaries rather than to the other joint owners. In the cabin example above, all the decedent’s children would have equal access and right to use the family cabin. They would also bear equal responsibility for maintaining the property and sharing in any liabilities associated with the property, such as property taxes. And ultimately, any co-owner could sell or pass on their share in the property in whatever way was in their own best interest.
Joint Tenancy is another form of joint ownership that, similar to tenancy in common, allows all joint owners the legal right to use and enjoy the entire property. Joint tenancy differs from tenancy in common primarily in that, when a joint tenant dies, that tenant’s interest in the property legally passes to the other joint tenants. It is also important to understand that a joint tenancy can be severed by any joint tenant through the sale or transfer of that individual’s joint interest without the consent of the other joint tenants, leading to confusion and animosity among the joint tenants if expectations are not clearly set and agreed to from the beginning.
Life Estates & Remainder Interests
A life estate can be a potentially very useful method of gifting an interest in real estate. This method is often implemented by a trust or a local county records office. Recipients of life estates have the legal right to use and enjoy the property as if it were their own throughout the remainder of their life. However, the recipient of a life estate typically has no right to sell, transfer, or borrow against the property, or determine to whom the property will pass upon the termination of the life estate.
A life estate can be very useful in a number of situations, including the following:
- long-term care (when someone wants to qualify for Medicaid)
- blended families
- family farms
There are various ways to pass on your property, putting it into safe hands after your death And while the variety of options available can be overwhelming at first, we are here to help you every step of the way. Give Music City Estate law in Franklin, TN a call today.