When two or more individuals purchase property together, they must decide how they wish to take legal ownership of the property. That decision is typically recorded in a deed or title at the time of purchase and while the primary focus may be on closing the sale and moving into the property, how you choose to hold title has long-term legal and financial consequences. It is easy to overlook the significance of this choice, yet the method of ownership can affect what happens to your interest in the property after death, how creditors may reach your share, and whether you can transfer or borrow against your portion. With that in mind, the Indianapolis attorneys at Frank & Kraft explain why the way you title jointly owned property matters in Indiana.
Forms of Joint Ownership in Indiana
State law governs the types of joint ownership available to property owners. In Indiana, individuals who co-own real estate may hold title in one of several forms with each option carrying distinct legal implications that should be carefully considered in light of your broader estate and financial planning goals. Indiana jointly owned property options include:
- Tenants in Common: One of the most common ways to hold title in Indiana is as tenants in common. This method allows each owner to possess an individual, undivided share of the entire property. Though all owners share equal rights to occupy the whole property, each person owns a separate interest that may differ in percentage from the others. This form of ownership is especially useful when the co-owners are not married or when each party wishes to retain the ability to sell, transfer, or mortgage their share without needing the approval of the other owners. If one co-owner passes away, his or her interest becomes part of that individual’s estate. This means it will go through probate and eventually pass to heirs, beneficiaries named in a Will, or individuals identified through intestate succession if no Will exists. The deceased person’s interest does not automatically transfer to the surviving owners.
- Joint Tenancy with Right of Survivorship: Another form of ownership is joint tenancy with right of survivorship. Under this arrangement, each owner has an equal and undivided interest in the property. What distinguishes this form from tenants in common is the survivorship feature. When one joint tenant dies, his or her interest in the property passes automatically to the surviving co-owner or co-owners, rather than to heirs or through the probate court. This type of ownership can be advantageous when individuals wish to avoid probate and ensure that the surviving co-owner gains full ownership. It is frequently used by couples or close family members seeking to simplify the transfer of property after death. In Indiana, the survivorship provision must be clearly stated in the deed; otherwise, the default legal presumption is tenants in common. Joint tenancy is not without its limitations, however, because if one owner decides to sell or transfer his or her interest, the joint tenancy will be dissolved. The remaining owners then hold the property as tenants in common with the new owner. Additionally, one joint tenant may petition the court to partition the property if disagreements arise, which could ultimately result in a forced sale of the property.
- Tenancy by the Entirety: For married couples in Indiana, tenancy by the entirety is a unique form of property ownership reserved exclusively for spouses. This structure is similar to joint tenancy in that it includes a right of survivorship. When one spouse dies, the surviving spouse automatically owns the entire property without the need for probate. Tenancy by the entirety differs from other forms of ownership in several important ways. Neither spouse can unilaterally sell, transfer, or encumber the property without the other’s consent. The couple is viewed by law as a single legal entity, and that classification provides strong asset protection benefits. For example, a creditor of just one spouse generally cannot force the sale of property held in a tenancy by the entirety to satisfy a debt. This added layer of protection makes it an appealing option for married individuals looking to shield their home or other real estate from individual liabilities. It is important to note that this form of ownership ends automatically upon divorce. At that point, former spouses become tenants in common unless they take steps to retitle the property.
Choosing how to title jointly owned property is not a purely administrative matter given that your choice influences how your interest in the property can be accessed by creditors, whether it passes through probate, and what control you retain over your portion during your lifetime. As such, before purchasing property with another person it is important to consult with an experienced Indiana estate planning attorney.
Can We Help You Decide How to Title Jointly Owned Property in Indiana?
For more information, please join us for an upcoming FREE seminar. If you need assistance deciding how to title jointly owned property in Indiana, contact an experienced Indianapolis estate planning attorney at Frank & Kraft by calling (317) 684-1100 to schedule an appointment.
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