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So You’re Thinking About Owning Property Jointly with a Companion?

The late 20th century and early 21st century has seen a dramatic shift in personal relationships.  Couples are moving in together without becoming married and some have rejected the concept of marriage altogether.  At some point, many couples begin to acquire property together — whether it be furniture, vehicles or real estate.  This article focuses primarily on real estate, since it is generally the most significant investment that couples will make.

The two primary forms of joint real estate ownership among unmarried person are as “tenants in common” and “joint tenancy with rights of survivorship.”[1]  With tenants in common ownership, each co-owner owns an undivided percentage of the whole property.  If one co-owner dies, the deceased owner’s interest passes to his or her estate.  With joint tenancy, each co-owner still owns an undivided interest in the whole, but in the event of death, the survivor owns the entire property.  Nothing passes to the deceased owner’s estate.

When in love, it is easy to forget that acquiring property together is, at least in part, also a business relationship. It is also easy to convince oneself that the relationship will last forever, but statistics tell us otherwise.  When one partner has contributed significantly more to the acquisition of the property than has the other partner, the death of one owner or the break-up of the partnership can result in significant inequities.  Divorce and dissolution of marriage laws generally provide a means to equitably adjust that imbalance.  However, when parties are not married, all rights flow from property law, and equitable adjustments may not be available.

The first point to remember is to secure the advice of an attorney before you title a property in joint names.  The recommendations of your real estate salesperson or mortgage broker may be worth considering, but are not legal advice.  In addition to seeking the advice of a lawyer, consider the following options:

  • Avoid titling property as joint tenants. The effect of doing so is that the property will not be part of your estate for distribution to children from a prior relationship or other persons with whom you wish to share your property at death.  Instead, title the property as tenants in common.  You can always include your partner in your last will and testament, and thereby achieve the same net effect but with the ability to change the will later if the relationship does not work out.
  • Put it your property ownership agreement in writing. Use a contract or co-habitation agreement to define your’s and your partner’s rights in property the event of separation or death.
  • Identify in the deed the exact percentage of ownership acquired by each co-owner (if it is not equal).

The acquisition of real estate with a life partner is in part, a business relationship in the same manner that marriage is in part a business relationship.  Never forget that fact.  By planning ahead, and defining each partner’s rights and responsibilities; significant time, expense and personal trauma can be avoided in the event that the relationship does not end as anticipated.

[1] This article is based upon the law of Indiana.  The laws of other states may be similar, or may be completely different.  Regardless of what state you live in, you should secure legal advice before acquiring real estate.