Happy Deed, Happy Life

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When is the last time you looked at the deed for your home? It is important to know how your home is titled. If you own your home jointly with someone else and that person passes away, it is important to know your rights. Did you purchase a home with your spouse prior to marriage? If so, you may need to sign a new deed. This article discusses the three primary ways in which title to property is held: Tenants in Common, Joint Tenants with Right of Survivorship, and Tenants by the Entirety.

Tenants in Common

One method of titling property is tenants in common. The most central aspect of owning property as tenants of common is that each owner may own a disproportionate share of the property. In its simplest form, if two friends purchase property together, they will each own an undivided 50% interest in the property. Each owner of the property may transfer his or her 50% interest in the property to anyone via a will or deed because there is no right of survivorship in property titled as tenants in common. In contrast, if property is titled with a right to survivorship (as hereinafter discussed), upon the death of one co-owner, the decedent’s interest passes to the other owner of the property. The downside of owning property as tenants in common is that upon the death of one co-owner, the decedent’s interest in the property must be administered through probate.

Owners of property as tenants in common cannot protect the property from creditors. Each co-owner has a vested interest in the property that is subject to attachment by creditors (meaning creditors may be able to seize the debtor’s interest in the property).

Tenancy by the Entirety

Tenancy by the entirety (“TBE”) is a form of joint ownership only available to husbands and wives, and in New Jersey, civil union partners. Spouses that own property as TBE each own an undivided one-half interest in the property, along with a right of survivorship. As such, upon the death of one spouse, his or her interest in the property passes automatically to other spouse, regardless of what a decedent’s will may provide. Neither spouse may sell his or her interest in the property without the consent of the other spouse.

In New Jersey, TBE property cannot be levied by a creditor unless the creditor has a judgment against both spouses. If a creditor has a judgment against only one spouse, the creditor may secure a lien against the property but the creditor cannot foreclose on the lien. The creditor of only one spouse generally has three options if property is owned as TBE:

1. Satisfaction of the debt if the property is sold.

2. The debtor’s right to survivorship.

3. The debtor’s right to occupy the property.[1]

Many of our clients purchase property with a spouse before marriage and neglect to update that deed from either tenants in common or joint tenants with right of survivorship to TBE. If the property remains titled as tenants in common, the property is subject to probate administration upon the first spouse to die.

[1] See e.g., S.E.C. v. Antar, 120 F. Supp. 2d 431, 449-51 (D.N.J. 2000) aff’d, 44 F. App’x. 548 (3d Cir. 2002).