When co-owners buy property together, one of the most important elements to consider is what should happen if a co-owner dies or becomes incapacitated.  Rights of survivorship must be carefully considered in the context of a co-ownership arrangement.

Generally, co-owners buy property as either tenants-in-common (“TIC”) or as joint tenants.

If a co-owner holds property as TICs, then their ownership interest becomes property of their estate upon death or incapacity.  Therefore, a TIC has two options to choose how their property interest flows:  through their Last Will and Testament, or through the provisions of a Co-Ownership Agreement.

By contrast, joint tenancy is a type of ownership whereby on death of a co-owner, their ownership interest passes automatically to the other co-owner(s) in equal parts.

Normally, when individuals co-buy property under a co-ownership agreement, they do so as TICs, because this structure allows for maximum flexibility regarding the disposition of their respective ownership interests.

However, TIC co-owners must be cautious. The co-ownership agreement will need to work in conjunction with an owner’s Will. If there are conflicting terms between a Will and a co-ownership agreement, then everyone involved – the estate, its beneficiaries and the co-owners – will likely incur substantial financial and time costs in order to settle the owner’s intention through negotiation, mediation or the Courts.

Therefore, both the co-ownership agreement and each co-owners’ Will should be examined carefully by an experienced lawyer to ensure that the structure of the co-ownership is established in accordance with the Will; and, contain unambiguous terms for dealing with death and incapacity.

In the case of a co-owner’s incapacity, it is imperative that a co-ownership agreement stipulate the person(s) who have authority to act on behalf of an incapacitated co-owner;  there cannot be any confusion regarding how decisions about the property are to be made in the absence of a vote by of the incapacitated  co-owner. For example, will a co-owner permit an external third-party to act on their behalf? Or, will the voting rights and decision-making power of the incapacitated co-owner pass to one or more of the other co-owners?

RPL is experienced in navigating the estates issues involved in structuring co-ownership relationships. Please contact us directly if you wish to discuss your options.

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