What are tenants in common?
Unlike joint tenants, tenants in common can own unequal shares in a property.
Plus, tenants in common do not often have rights of survivorship. If one owner dies, their interest in the property does not automatically transfer to the other owner(s).
Imagine that Sam, Bill, and Mary all own a house together. Sam owns 50%, Bill 30%, and Mary 20%. So, what happens if one of the tenants in common dies?
Well, their interest in the property goes to the beneficiary named in their Last Will and Testament.
That means if Sam dies and doesn’t name Bill or Mary in his Will, their shares in the property don’t change
. If Sam doesn’t leave a Last Will
, his estate gets distributed according to state intestacy laws.
Tenancy in common is beneficial for people who want to control the percentage of interest each party has in a property.
Consider it this way: Sam, Bill, and Mary use the home as an investment property. Each of them contributes differently to mortgage payments, building renovations, and property management. As such, they prefer ownership rights to be equal to their capital investments.
This type of tenancy is also useful for people who don’t want to leave their interest in a property to another owner. For example, Mary might want her 20% share to go to her daughter instead of to Bill or Sam.
If you‘re a tenant in common, it’s crucial to create a Last Will and Testament
to pass your property interest to the beneficiary of your choice.