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New Jersey real estate

New Jersey Real Estate: What is Tenancy in Common?

On Behalf of Veitengruber Law | Sep 03,2021

When it comes to New Jersey real estate, there are three main forms of joint property ownership: tenancy in common, joint tenancy, and tenancy by the entirety. If you own property with at least one other person, it is important to understand how each of these forms of ownership function and the legal implications for you and your co-owner(s). Here we will break down these three forms of joint ownership to help you determine which one is the best for you.

A tenancy in common is a form of ownership in which two or more people own an undivided interest in an entire property. Under this form of ownership, there is no right of survivorship, meaning that ownership does not automatically transfer to the other owner(s) in the event of one owner’s death. For example, Person A and Person B own a vacation home. Person A dies. Person B does not automatically get sole ownership of the vacation home. Instead, the ownership interest of person A will be transferred based on their wishes as put forth in their will.

A joint tenancy, on the other hand, does contain a right of survivorship. In this situation, if A and B own a vacation home together and A dies, B would have the right of survivorship and would therefore assume sole ownership of the property. Tenancy by the entirety is similar in that it also contains a right of survivorship, but it can only be used by married couples.

If you are considering any of these forms of ownership as part of your estate planning, there are some benefits and drawbacks you should be aware of. The main benefit of joint tenancy and tenancy by the entirety is to provide an easy way to pass ownership at death while avoiding probate. When one owner dies, the title will immediately be transferred to the other owner without them having to pay any fees. This can offer a more convenient legal avenue for spouses or parents looking to pass property to loved ones after death.

A word of caution for married couples using joint ownership: there are some tax implications. Right now, US residents are allowed to transfer up to $5,450,000 in assets tax free upon their death; there is no limit to the amount married couples can transfer to each other tax free. If a married couple jointly owns more than the $5,450,000 exemption in property, the spouse who died last will only be able to use their exemption to transfer the maximum. Any property or assets more than the maximum exemption will be taxed. This is why if a married couple intends to pass property to children or other loved ones, they should consider a different joint ownership designation.

If you are considering joint ownership as a means of estate planning, Veitengruber Law can help you determine which contract will be the most useful to you. When done right, you can save your loved ones a lot of headache when it comes to determining the fate of your property after your death.


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