Financial Tips: Investing in Tenancy in Common

Tenancy in Common is joint ownership of property where property ownership does not pass to other joint tenants in the event of death unless specifically stated through legal documentation. Joint tenancy in common is not the same as joint tenancy which is subject to 'rights of survivorship' by the other joint tenant(s) regardless of willed property.

Joint tenancy in common ownership can be subject to more extensive legal stipulations than more rudimentary forms of ownership. Taxation of property held in joint tenancy in common may also be regulated by different tax codes depending on the type of property.. Two typical examples of joint tenancy in common are illustrated below:

•Joint Tenancy of Real Estate: When two or more people have joint tenancy of a property they may both own a percentage share of the asset value of the home but not a distinct portion of the physical property.

•Liquid Capital Joint Tenancy: Unlike joint tenancy in housing, joint tenancy of liquid assets such as stock investments is not always subject to the same requirements. In this case joint tenancy may only imply joint ownership with no distinction of how much of the asset each owner owns.

Joint tenancy is subject to various benefits and disadvantages that are not typical of other types of asset ownership. These factors are ideally considered before entering joint tenancy contract(s) and are illustrated as follows:

Benefits of Tenancy in Common:

•Tax advantages: Joint tenancy in common has post-mortum tax advantages. That is, if one is planning from after (s)he dies, there can be an increase in the applicable property deductions an inheritor of the property is able to utilize. More deductions usually mean lower taxation.

•Leveraged Investment: Since joint tenancy is not full ownership it does not require the same amount of financing. This can allow one to become ownership in multiple properties, in affect leveraging the money one would have used for one home for ownership in several homes.