|Protecting the assets of unmarried
"You have to think it through, because with joint
(tenancy) and rights of survivorship, that deed says that if one
party passes away, the property automatically goes to the other
person," says Neiman. "State laws dictate property rights.
Though some states may not call it 'joint tenants with rights of
survivorship,' the law is based on the same assumption -- that upon
death of one of the owners, the property passes to the other."
If the parties contributed unequally,
they may want to hold the property as "tenants in common,"
where the percentage owned by each person is specified. If one party
passes away, the person named in the will of the deceased will receive
the remaining piece of the pie.
"A tenancy in common is an interest in land in
which you have your own undivided interest," says Rosenthal.
If the property is sold at a later date, each party will receive
his or her percentage of the proceeds.
A downside risk to a tenancy in common is the chance
of losing a share of the property in a dispute. If one party is
sued, a court order could require the sale of the house, in which
the party who is not sued will keep his or her share of the proceeds,
and the creditor will be paid from the proceeds of the other party.
In the event of the death of one owner, it could be
problematic if the deceased's share of the house is left to a relative
who does not get along with the surviving party. In that event,
the parties may not agree about what to do with the property. What
if one person wants to sell the place and the other wants to keep
it, but cannot afford to buy out the other?
Ideally, the parties involved will be able to work
"Ordinarily, the only way out would be to file
a suit for partition of the property, which is basically the sale
and distribution of the proceeds of the property," says Rosenthal.
The courts have discretion to work out an equitable resolution for
both parties. A suit of partition takes time, and it is something
that both parties may want to avoid.
Also, be concerned about title insurance. "You
want to be sure that title insurance, as well as property insurance,
specifically covers both individuals," says Erhardt.
William L. Abrams, a tax lawyer and partner at Abrams
Garfinkel Margolis Bergson LLP in Los Angeles and New York, suggests
that co-owners of property do not commingle personal assets. Keep
only a minimal amount of funds in a joint account for the convenience
of paying expenses related to the property, he says.