Right of Survivorship Vs Tenants in Common

Making the decision between a Right of Survivorship and Tenants in Common can be difficult, especially when it comes to personal finance. Both have their own set of advantages and disadvantages, and it can be hard to decide which is right for you.

In this guide, we will compare and contrast both options, so that you can make an informed decision about what is best for your needs.

What is a Right of Survivorship?

A right of survivorship is a legal arrangement where two or more people own property together and, upon the death of one owner, the surviving owner(s) automatically inherit the deceased owner’s interest in the property.

What is a Tenants in Common?

Tenants in common is another type of co-ownership where each tenant owns a separate and distinct share of the property.

If one tenant dies, their interest in the property does not automatically pass to the surviving tenant or tenants. Instead, the deceased tenant's interest in the property passes to their heirs or beneficiaries as specified in their will.

What is The Difference Between a Right of Survivorship Vs Tenants in Common?

The main difference between a right of survivorship vs tenants in common is that in the event of one owner’s death, their ownership stake is completely inherited by the surviving joint owner (or owners), whereas with tenants in common, each owner can pass on their ownership stake to whomever they choose in their will.

Another key difference is that all joint owners must sign off on any changes made to the property, whereas with tenants in common, each owner has sole control over their stake and can make changes without consulting the other owners.

What Are The Different Types of Right of Survivorship?

There are four different types of Right of Survivorship:

• Joint Tenancy with Right of Survivorship
• Tenancy By the Entirety
• Community Property with Right of Survivorship
• Tenancy in Common

Joint Tenancy with Right of Survivorship

Out of these, joint tenancy with right of survivorship is the most commonly used. This is because it offers the best protection for both parties involved.

Tenancy By the Entirety

Tenancy by the entirety is only available to married couples, and it gives each spouse an equal right to the property.

Community Property with Right of Survivorship

Community property with right of survivorship is only available in certain states, and it gives each co-owner an equal share of the property.

Tenancy in Common

Tenancy in common is the least common type of Right of Survivorship, but it offers the most flexibility. This is because each tenant can leave their share of the property to whoever they want in their will.

What Are The Different Types of Tenants in Common?

There are four different types of tenants in common:

• Sole Tenancy in Common
• Joint Tenancy in Common
• Tenancy by the Entirety
• Community Property

Sole Tenancy in Common

A sole tenant in common is an individual who owns 100% of the property. This type of tenant in common has full rights to the property and can do whatever they please with it.

Joint Tenancy in Common

A joint tenant in common is an individual who owns 50% of the property. This type of tenant in common has half the rights of a sole tenant in common and can only use the property for Half the time.

Tenancy by the Entirety

A tenancy by the entirety is a type of joint tenancy in common where both tenants own 100% of the property. This type of tenant in common has full rights to the property and can use it equally.

Community Property

Community property is a type of joint tenancy in which each tenant owns an undivided interest in the property. This type of tenant in common has full rights to the property and can use it equally.

What Are The Advantages of a Right of Survivorship?

The main advantage of a right of survivorship is that it ensures your property goes to your chosen beneficiary upon your death. This can provide peace of mind and avoid any potential family disputes.

Another advantage is that it can be cheaper and easier to set up than other types of ownership, such as tenants in common.

What Are The Advantages of a Tenants in Common?

The advantages of a tenants in common are that each tenant can pass on their interest in the property to whomever they choose through their will, and there is no right of survivorship.

This means that if one tenant dies, their interest in the property does not automatically go to the surviving tenant or tenants. Each tenant also has the right to sell or mortgage their interest in the property without the consent of the other tenants.

What Are The Disadvantages of Right of Survivorship?

There are a few key disadvantages of right of survivorship that you should be aware of before making your decision.

First and foremost, right of survivorship automatically passes on your property to your surviving spouse upon your death. This means that if you have children from a previous marriage, they will not inherit any portion of the property. Additionally, if you are not married, your property will go to your surviving spouse instead of any other family members.

Another disadvantage of right of survivorship is that it can complicate things in the event of a divorce. If you and your spouse decide to divorce, the property will be automatically transferred to your spouse without going through any legal process. This can be a major hassle if you want to keep the property for yourself or sell it and split the proceeds with your ex-spouse.

Finally, right of survivorship can also have negative tax implications. In some cases, the IRS may treat the transfer of property as a taxable event, meaning you could be on the hook for paying taxes on the sale of the property.

Overall, right of survivorship is not a perfect solution for everyone. It’s important to weigh the pros and cons carefully before making a decision about what’s best for you and your family.

What Are The Disadvantages of Tenants in Common?

When you die, your share in the property does not automatically pass to your surviving co-tenants. Instead, it forms part of your estate and will be distributed in accordance with your Will (or the intestacy rules if you don’t have a Will). This can cause difficulties for your surviving co-tenants who may have to apply to the court for an order to sell the property.

Another disadvantage of tenants in common is that it can be more difficult to get a mortgage on a property held as tenants in common. This is because each tenant in common will usually be jointly and severally liable for the whole of the mortgage debt. This means that if one tenant in common defaults on their mortgage payments, the other tenant in common may have to make up the shortfall.

Finally, tenants in common do not have the same protection from creditors as joint tenants. This means that if one tenant in common is declared bankrupt, their share in the property could be sold off to help pay their debts.

So, Which One Should You Use?

The answer to this question depends on your unique situation. If you are married or in a long-term relationship, right of survivorship may be the best option for you. This is because it ensures that your property will go to your partner in the event of your death.

On the other hand, if you are single or have a complex financial situation, tenants in common may be a better option. This is because it allows you to specify who will inherit your property in the event of your death.

What Are Some Alternatives to Using a Right of Survivorship Vs Tenants in Common?

There are a few alternatives to using either Right of Survivorship or Tenants in Common. One option is to create a joint tenancy with right of survivorship, which means that the surviving tenant will automatically inherit the property. Another option is to create a tenants-in-common agreement, which outlines how the property will be divided if one of the tenants dies.

Both of these options have their own advantages and disadvantages, so it's important to weigh all factors before deciding which route to take. If you're still not sure which option is right for you, be sure to speak with a financial advisor or attorney who can help guide you through the process.

What Are Some Tips For Using a Right of Survivorship?

If you're looking to set up a right of survivorship agreement, there are a few things you should keep in mind.

First, both parties should have a clear understanding of what the arrangement entails and what their rights and responsibilities are.

Second, the agreement should be in writing and signed by both parties. And finally, it's important to consult with an attorney or financial advisor to make sure the arrangement is legally binding and meets your needs.

What Are Some Tips For Using Tenants in Common?

Some tips for using tenants in common are to make sure that all parties involved understand the terms of the agreement, that each party has their own copy of the agreement, and that the agreement is signed by all parties.

It is also important to keep the agreement in a safe place where it can be easily accessed by all parties. Finally, it is important to consult with an attorney if there are any questions about the agreement or its terms.