Have you found the mountain home that is right for you? Are you ready to submit an offer? In Colorado, the offer is prepared using a standard Contract to Buy and Sell form. On this form, there is a section that asks “How will you take title in the property?” Sole Ownership or Co-Ownership? If co-ownership, will you take title as “joint tenancy” or “tenancy in common”. Typically, a couple will buy as joint tenants. It is important to remember that the way in which the title is vested has important legal and tax consequences. It is best to consult an attorney if you are unsure. Here are a few important differences to know between joint tenancy and tenancy in common.
Joint tenancy is a way of owning real or personal property by two or more individuals. When property is owned in joint tenancy, there are two or more owners and each owns an undivided share in the same interest. If property is not owned in joint tenancy, it is owned as “tenants in common” and each owner owns a particular percentage. In order to own property in joint tenancy, the deed or title must have the words “as joint tenants” or in “in joint tenancy”; otherwise it will be assumed that the co-owners own the property as tenants in common. In a joint tenancy situation, when one of the joint tenants dies, his or her interest automatically passes to the surviving joint tenant(s), allowing the surviving joint tenant(s) to avoid probate.
Advantages of Joint Tenancy:
Owning property in joint tenancy allows the surviving tenants to avoid filing a probate action with the court, because title transfers by operation of law.
For Medicaid recipients, if property is owned in joint tenancy, it never becomes part of the recipient’s probate estate, and is therefore not subject to estate recovery claims by the Colorado Department of Health Care Policy and Financing.
Disadvantages of Joint Tenancy:
Property owned in joint tenancy is subject to the liabilities and creditors of all of the joint tenants. For example, if one of the joint tenants is held liable in a civil law suit, the plaintiff or creditor may force the sale of the entire property. Similarly, if a bank account is owned in joint tenancy, any of the joint tenants has the right to make withdrawal at any time.
Transferring property into joint tenancy or making major improvements to property already held in joint tenancy may cause gift tax liability (unless the joint tenants are married).
Owning property in joint tenancy may cause unintended consequences, such as disinheriting a child or loved one because provisions were made for them in the will, but the joint tenancy property is not subject to the terms of the will. Property owned in joint tenancy may be subject to the claims of a surviving spouse and children when a decedent’s probate estate assets are insufficient to pay such claims.
The above information is published as a public service by the Colorado Bar Association. Its purpose is to inform citizens of their legal rights and obligations and to provide information regarding the legal profession and how it may best serve the community. Changes may have occurred in the law since the time of publication. Before relying on this information, consult an attorney about your individual case. For further information, visit www.colorado.state.co.us or coloradolegalservices.org.
Tenancy in Common:
Tenancy in common is a form of concurrent ownership of real property in which two or more persons possess the property simultaneously; it can be created by deed, will, or operation of law.
Tenancy in common is a specific type of concurrent (simultaneous) ownership of real property by two or more parties. All tenants in common hold an individual, undivided ownership interest in the property. This means that each party has the right to alienate, or transfer the ownership of, her ownership interest. This can be done by deed, will, or other conveyance.
Another difference between tenants in common and joint tenancy is that tenants in common may hold unequal interests. By contrast, joint tenants own equal shares of the property. Furthermore, tenants in common may acquire their interests from different instruments — joint tenants and tenants by the entirety must obtain their interests at the same time and in the same document.
There are many variables to consider, and you should consult with your attorney to determine what is the best option for you and your spouse to take title in a property.
How can I help you? I have over 30 years of sales and marketing experience and a top real estate agent in the mountain town of Crested Butte, Colorado representing affluent clients who are buying and selling their home and ranch properties in the mountains. To see featured properties or search the Crested Butte MLS – visit chriskopf.com. How is the Real Estate Market doing? Click this link to see my monthly Crested Butte Real Estate Market Reports. Whether you have questions about buying a mountain home as joint tenancy or simply have questions about the area, I appreciate the opportunity to earn your business and be your Crested Butte Real Estate Agent.
Chris Kopf, Coldwell Banker Bighorn Realty
Previews® Property Specialist