LONGMONT – When two or more people are going to own title to real estate together, they must decide how title will be held. In Colorado, there are three common ways: Joint Tenants, Tenants in Common, or as Trustees of a Revocable Living Trust. You should work closely with your estate-planning attorney to determine the best way for you to hold title to real estate.
Tenancy in Common
Each co-owner owns a separate and distinct fractional share of undivided property with a non-exclusive right to possession of the entire property. Each person is considered the sole owner of his or her separate share and has the right to mortgage, sell, or transfer such interest without consent of the co-owners. Tenants in Common can be individuals, partnerships, corporations, trusts, or other legal entities. A major downside is that a deceased person’s ownership interest generally must pass to heirs through the probate court based on any applicable Will or by operation of Colorado law.
Joint Tenancy must be stated on the Warranty Deed, Quit Claim Deed or Special Warranty Deed (e.g. “as joint tenants” or “in joint tenancy”). Otherwise, Colorado law will assume the buyers took title as “Tenants in Common.” Joint Tenancy applies only to co-ownership between individuals. A deceased joint tenant’s interest passes automatically by operation of law to the surviving joint tenant(s) – not to the deceased person’s heirs. Joint Tenancy property is subject to the liabilities and creditors of all joint tenants. Owning property in joint tenancy may cause unintended consequences, such as disinheriting a child or loved one because provisions were made for them in a Will – but the joint tenancy property is not subject to the terms of the Will and can pass to a second spouse who is a joint tenant. A surviving joint tenant spouse owns the property outright on the death of the deceased spouse without the need for probate court involvement. However, the downside is that when the surviving spouse dies (owning the property in his or her name alone), a probate under a Will or Colorado law must occur.
Title owned by a Revocable Living Trust
Most people make a big mistake that forces their real estate and loved ones to go through the probate court system. Many people want to avoid probate because it generally requires legal fees and costs and is time consuming, stressful, and public – meaning anyone anywhere can see who got what and how to contact them (nosey neighbors, predators, and unscrupulous “charities”). Both “death probate” and “lifetime probate” (court-appointed “conservator” for mental disability) can be avoided by changing the real estate title from your individual name (or joint names) to the name of your revocable living trust – for example, from you to “I. M. Smart and U. B. Smart, Trustees of the Smart Living Trust dated March 1, 2016.”
Marc R. Carlson, Esq., is an Estate Planning Attorney at Carlson Law Office located at 1729 Terry Street in Longmont.