If you want to own property with another person and you are not married, what are your options?

Joint Tenancy

Joint tenancy has a right of survivorship. That means the asset will automatically pass to the surviving owner. That is a pretty good option for a lot of people. Joint tenancy also means that a creditor or either owner can take the entire asset. That is generally not a good thing. Many parents put their children on the title of their house not realizing that a creditor of their children can take their house.

Tenancy in Common

There is no right of survivorship. In this type of ownership, you own a set percentage. If the two parties each own 50% then you each own an undivided 50% interest. You are able to leave that interest to whomever you choose. You can even put your share in a trust. Generally, creditors are not interested in assets owned by more than one person unless debtor does not have assets in his or her own name. The creditor can only place a lien on the asset. They cannot force you to sell. However, a creditor will put a lien on a piece of property owned by more than one person. Owning an asset in tenancy in common is NOT asset protection.

Problems with Joint Ownership

  • If an asset is owned jointly then both parties must agree as to the distribution of the asset. If the parties do not agree then the only option is to seek judicial intervention.
  • If a portion of the property is given to a child in the child’s lifetime, then the child inherits that share at the parent’s original basis. That means whatever amount of capital gains is already in the asset at the time of the gift remains in the asset. There will be no erasing of the capital gains in the gifted amount at the death of the parent.
  • If the child dies before the parent then the parent will re-inherit the property. In order to get the same set-up, the parent will have to re-gift the property.

You spend a long time getting your wealth, it is remarkably quick and easy to lose it.