How to Ensure a Co-Owner of Real Estate Inherits from You

Many people believe that if they co-own real estate with another person, such as a spouse or family member, the surviving co-owner automatically inherits the property upon their death. This is not true in the vast majority of circumstances. This common misconception stems from the idea that co-ownership inherently includes a right of survivorship. However, this is usually not the case, and misunderstanding this can lead to significant legal and financial complications.

The Reality of Real Estate Co-Ownership

In reality, the inheritance of co-owned property depends on the type of co-ownership arrangement in place. There are two forms of co-ownership in Texas, and each has different implications for inheritance:

1. Tenancy in Common: In this arrangement, each co-owner holds an individual, undivided interest in the property. When one co-owner dies, their share does not automatically pass to the surviving co-owner. See Est. Code Sec. 101.002. Instead, it becomes part of the deceased’s estate and is distributed according to their will or Texas intestacy laws if there is no will. This is the default co-ownership for real estate in Texas. If the deed to your home was prepared by a title company, this is likely how your home is co-owned. Simply “adding someone to the deed” is not a valid probate avoidance technique.
2. Joint Tenancy with Right of Survivorship: This form of co-ownership does include a right of survivorship. When one co-owner dies, their interest in the property automatically passes to the surviving co-owner(s). However, the right of survivorship must be explicitly stated in the deed for this to apply.

“But we own the property. We are not tenants!” Tenancy is a legal term used to describe ownership, though it can be very confusing.

Common Real Estate Misconceptions

The myth that all forms of co-ownership include a right of survivorship likely arises from confusion between these different types of co-ownership. Many people assume that simply being named on the deed is sufficient to ensure that the property will pass to the surviving co-owner. This assumption can lead to unintended consequences, such as the property being subject to probate, which can be a lengthy and costly process. If someone dies without a will or trust in Texas and has children from a previous relationship, the children inherit half of the home, not the surviving spouse!

How a Trust Can Fix This

A trust is a powerful tool that can provide clarity and certainty regarding the inheritance of co-owned real estate. By placing property in a trust, you can ensure that it passes directly to the intended beneficiary without the need for probate. Here’s how it works:

1. Creating the Trust: The property owner(s) create a trust and transfer ownership of the property to the trust. They designate themselves as trustees and can manage the property as they see fit during their lifetime.
2. Designating Beneficiaries: The trust document specifies who will inherit the property upon the death of the owner(s). This can include a surviving spouse, children, or other beneficiaries.
3. Avoiding Probate: When the owner(s) pass away, the property held in the trust does not go through probate. Instead, it is distributed directly to the beneficiaries according to the terms of the trust. This process is usually quicker and less expensive than probate.
4. Ensuring Survivorship: By using a trust, you can create an automatic right of survivorship for the surviving spouse or other designated beneficiaries. This eliminates any ambiguity about the inheritance of the property and ensures that it passes smoothly to the intended recipient.

Conclusion

Understanding the nuances of co-ownership and inheritance is crucial to avoid unintended legal and financial complications. While co-ownership can provide a right of survivorship in certain circumstances, it is not automatic in all cases. Utilizing a trust can provide peace of mind by ensuring that property passes directly to the intended beneficiaries without the need for probate. This proactive approach can save time, money, and stress for surviving family members during an already difficult time.

For Texans seeking affordable estate planning solutions, including the creation of trusts, TexanWillsandTrusts.com offers a range of services designed to meet your needs. By planning ahead, you can protect your property and ensure it is inherited according to your wishes.