More Than One Deed Owner – Who Owns What?

Two weeks ago, we began our discussion about deeds. First we talked about the different types of deeds and then deed ownership interests. We have also been discussing how a small change in the words used on a deed can make a huge difference in the ownership interest conveyed by the deed. Today is no different.

In today’s column we will discuss when you have more than one name on a deed as an owner and the rights of each of the owners. We will discuss tenants in common, joint tenants, with and without survivorship and tenants by the entireties.

Tenants in Common.

A deed to two or more individuals who are not trustees or husband and wife is generally considered to be as tenants in common, unless there is language that expressly states otherwise. This is pretty much the default provision in Michigan. With tenants in common, every one of the owners own a percentage interest in the property which they can sell, transfer or will  to anyone they choose. If you have four names on a deed as owners as tenants in common, each would own 25% of the property.

Upon the death of any tenants in common owner, the deceased’s percentage interest in the property would need to be probated and then distributed in accordance with the deceased’s will, if there is one. If there is no will, the deceased’s property interest would go in accordance with the Michigan statute governing estates for people who die without a will.

You may have added your four kids to your deed with you when you purchased the property or did your own quit claim deed adding your four children to the deed with you. Without any qualifying language, it is considered tenants in common with you and each child having a one-fifth or 20% interest. Upon your death, your 20% share would not automatically go to the children. Your share would need to be probated. This is probably not the result you wanted. If you have a will, it would go in accordance with your will. If you do not have a will, Michigan statute will determine who gets your one-fifth.

This was reinforced recently by the Michigan Court of Appeals in a case originating in St. Clair County. When a homebuyer purchased his condominium, he added his son to the deed. It was clear from the evidence that the homebuyer wanted the condominium to go to his son as survivor, upon his death. However, the deed did not say that, it only said father and son. The Court of Appeals ruled that the language in the deed governed, not the intent of the parties. One-half of the condominium had to be probated in the father’s estate and was subject to claims by the State of Michigan to reimburse the State for Medicaid payments made on behalf of the father. This result could have been avoided if the deed was joint tenants between father and son.

Another drawback to tenants in common ownership is if you ever wanted to sell your home during your lifetime. Not only would you need to have all your children sign off, you would need the wife of each of your sons to also sign off. This does seem kind of sexist, but in Michigan, wives generally have a dower interest in any real estate their husbands own during the marriage, but not vice versa.

Another downside with tenants in common property, is that any of your children as co-owner can transfer or sell their interest in your property at any time. You may find that one or more of your children may have to sell their interest in your home to satisfy their creditors or pledge it as collateral for their loans. That is probably not what you intended when you added the children to the deed to your home.

Joint Tenants.

If instead of just adding your four children’s names on the deed to your home without any qualifying language, you had named yourself and your four children as joint tenants, there would be a slightly different result. If you died before all your children did, each of your children would share in your portion of your home, without probate.

There are a few twists to joint ownership that could have unintended results. With joint tenants, as with tenants in common, one of your children could sell or transfer his or her interest in your home, even during your lifetime. If that happens, it severs the joint ownership as to the transferred interest which instantly becomes tenants in common property. All the remaining joint owners would remain as joint tenants among themselves. Upon your death, only the remaining joint owners would share in your 20% interest in your home, without probate. The successor to the transferor child’s interest would not get any part of your share. In this situation, your children would not be treated the same.

If however, you named yourself and your four children on the deed as joint tenants with rights of survivorship, instead of as just joint tenants, there would be a different result. As with just joint tenants, if you die first and none of the children transferred their interests, upon your death, all of the children would divide your 20% interest in your home, without probate. If one of the children transfers his or her interest in the property, it does not sever the joint tenancy ownership as to that child’s interest, as in the case of just joint tenants. When one of the children does transfer his or her interest to someone else, the transferred interest continues to be governed by the transferor child’s lifetime. All that would be transferred is a life estate in the property for the transferor child’s lifetime and the chance to own the whole property if the transferor child survived the other joint tenants.

As joint tenants, with or without survivorship, each of the joint owners have a right to use the property during their lifetime. Generally, one joint owner cannot legally keep any other joint owner off the real estate. What each joint owner technically has is a joint life estate with a contingent remainder. Just like with tenants in common ownership, when you want to sell your property during your lifetime, all of the children would have to sign off on the deed before the property can be sold. However, different than tenants in common ownership, with joint tenancy ownership, your sons’ wives generally do not need to sign off on the deed when you sell the property.

I call joint tenant deeds, the lifetime lottery deed. The last joint owner surviving gets it all. If you and your four children are on the deed and one of your children predeceases you, the deceased child’s heirs get nothing. And if one of your children survives you and all of your other children, the survivor gets the whole thing. The heirs of your other joint owner children get nothing. You would be disinheriting your grandchildren just because their parent died first. That’s a tough penalty. They would lose not only a parent, but also their inheritance from grandma or grandpa. Is that the result that you really want?

Tenants by the Entireties.

The last type of multiple ownership interest that we will discuss today is tenants by the entireties. Generally, a deed transferring real estate to a husband and wife, unless indicated otherwise, results in property owned as tenants by the entireties. If you are married and own your home with your spouse, you probably own your home as tenants by the entireties. When the two of you own property as tenants by the entireties, it is kind of like joint ownership with rights of survivorship between spouses. Each spouse has the right to use the property during his or her lifetime and upon the death of one of the spouses, the other spouse owns the entire property as a matter of law without the need for probate.

I regularly see deeds that individuals or their children have drafted that are tenants in common when they intend the ownership to be joint tenancy, which results in probate upon a co-owner’s death. I also regularly see deeds that are joint tenancy when it is intended to be tenants in common. For most people, your home is your single largest investment. A deed may look simple because it is a single page document. Would it not be prudent that you protect that investment? The best way to protect your investment is to hire a competent legal professional to draft your deed so that you do not have unintended results.

By Matthew M. Wallace, CPA, JD

Published edited January  8, 2017 in The Times Herald newspaper Port Huron, Michigan as: More than one deed owner – who owns what?