In real estate and estate planning, a property with only one owner is said to be “tenancy in severalty,” also known as “ownership in severalty.” The idea behind the term is that an owner is “severed” from other owners and holds sole ownership. It also denotes that there are no specific restrictions on other owners and that the single owner is free to do whatever they want with the subject property. For example, without requesting permission from other parties, they can sell it, give it as a gift, lease it to tenants, or pass it on to heirs.
The type of tenancy can determine who controls a piece of property and what can happen to it after someone passes on. Two main types of tenancy can have a significant impact on estate planning, and they are very different.
Tenancy in severalty, as mentioned, describes sole ownership, whether the sole owner is a person or a company. Since there are no other owners, they are not required to consult them while making property decisions.
Tenants in common is a term used to describe an ownership structure in real estate when several owners are present simultaneously. Each title holder and their percentage interest in the property are listed in the deed. Most of the time, a property will have equal title held by many owners, and each owner is free to transmit their stake in the property in any way they see fit. That said, they are not permitted to make decisions about the property as a whole.
It’s imperative to determine if tenancy in severalty is in your best interests or if you want to modify your property ownership to something else, such as involving joint ownership with another person or entity.
Tenancy in severalty has its place in real estate and estate planning, but it’s crucial to be as fully informed as possible. Here are some notable benefits and drawbacks to think about.
Having sole ownership of a property is a large part of the appeal of tenancy in severalty. First, sole ownership frees you from coordinating with other owners and allows you to avoid any potential disputes or problems brought on by joint tenancy arrangements.
As a single owner, you have the most influence over your property. Therefore, you are free to sell, lease, mortgage, or transfer ownership whenever and however you choose, as you don’t need to coordinate with other owners.
You might not want to choose the tenancy in severalty ownership if you are married or in a legal partnership. For example, your partner would not inherit it by default if you passed away because it does not grant them the right of survivorship. However, if, for whatever reason, you deliberately didn’t want your partner to inherit your property, this would be a viable option.
Tenancy in severalty can make estate planning simpler. It’s less complicated since you don’t have to handle the complex logistics of splitting a property interest with others. Compared to other forms of real estate ownership, you can more easily distribute property through a will.
It’s important to know, however, that in a tenancy in severalty, there are no rights of survivorship. Therefore, property ownership cannot be automatically transferred upon death to a surviving spouse or other heirs. Instead, it must go through the probate process, which can take months or years to settle.
To avoid probate, one option is to transfer the property to a trust. A trust helps protect your assets for your heirs by preventing them from going through probate. In addition, since a trust now owns your property, it is essentially removed from your estate.
You might still wonder if tenancy in severalty is the best option for you. Your specific situation and desired results will determine how to proceed, and you should remember you have options. For example, you can often change your ownership structure by recording a new deed, although this can be challenging if you currently have a joint ownership arrangement. You could also take advantage of a trust’s protections and flexibility.
When determining your best course of action, whether for establishing a tenancy in severalty, a will, trust, or other forms of estate planning, it’s always good to have experts on your side.
You can be confident that working with the team at Heban, Murphree & Lewandowski, LLC will get you the results you desire. We are ready and waiting to answer your questions and walk you through the estate planning process from beginning to end.
Call today for a free consultation. 419.662.3100