The ownership of real estate, especially your first home, can be such a wild ride of unknowns. At Covalt Law, we are asked regularly “How do I take title to my home.” Like any good legal response, the answer always is, “it depends!”
How many people are going to be owners of the property?
“It depends” is the answer because this is a fact based question. What we need to know first is, “how many people will own the home?” If the answer is “just me;” well, then you will be the “sole owner” of the home.
What if there will be more than one owner of the property
Now you have options!
In Pennsylvania, multiple persons can hold title to real estate in one of three ways:
- Tenants in Common;
- Joint tenants with Right of Survivorship; or
- Tenants by the Entireties.
Tenants in common is best used for non-married spouses who are holding an asset together as friends or business partners and do not intend to inherit the property from the other joint owner in the even one predeceases the other.
For example: John and Paul are best friends from college. They attended Penn State University and are now in their mid-40s. They really enjoy coming back to State College throughout the fall for PSU Football games as well as Arts Fest in the summer. Because of this, they decided to purchase a townhouse that permits short-term rental activity which meets their investment needs. They hold title as 50/50 owners but as Tenants in Common because they each want their children (who are also PSU alums) to inherit their 50% share in the property upon their passing.
The key distinction to remember about “Tenants in Common” is that your estate/heirs can inherit the property without the consent of the remaining joint tenant(s).
Next up, is Joint Tenants with Right of Survivorship.
This tenancy is perfect for owners who want their interest in the property to immediately pass to the surviving tenant.
For example: An unmarried couple (Jim and Sally) who are engaged but not yet married put an offer on their dream home. They are each applying for the mortgage and both will be responsible for the debt/payment each month. They want to be sure that should something happen to either of them, the house will immediately pass to the surviving tenant. As such, at the time of settlement, Jim and Sally ask their closing attorney to put them on the deed as “Jim and Sally, unmarried adults, as joint tenants with right of survivorship.” This way, if something happened to Jim, Sally would immediately inherit Jim’s 50% ownership interest in the home upon his passing and would not lose the home to the heirs of Jim’s estate if Jim did not have an estate plan OR did not update his estate plan in order to provide for Sally in light of their serious relationship.
Last but not least is Tenants by the Entireties.
This tenancy is reserved for married spouses only. The reason for this is because in Pennsylvania, we afford a means of asset protection for spouses merely by how they take title to property.
For example, Becky and William, who are married, purchase their forever home and take title as married spouses; they will be listed on the deed as “Becky and William, married spouses, as tenants by the entireties.” Then, if either Becky or William get into an accident and a judgment is placed against them, that judgment cannot be attached to their home because the law sees married spouses, at least in Pennsylvania, as “one unit.” As such, only judgments against BOTH Becky and William (for example, a mortgage, unpaid credit card, etc.) can be attached to the property because the debt or judgment is in BOTH of their names.
Please note, it is important to keep in mind that just because you get married later (Jim and Sally), doesn’t mean you automatically convert to “Tenants by the Entireties” status. Instead, you must execute a new deed in order to update your title and record that deed with the Recorder of Deeds Office in your respective county.
If you have questions about Pennsylvania inheritance tax, feel free to reach out to Covalt Law at your convenience; we’d be happy to provide you with an overview of what to expect as you plan for your estate or administer a loved one’s wishes.
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