Property Ownership

Main Menu Table of Contents Copyright Disclaimer Questionnaires FCS Home Page Elder Law Section Contributing Attorneys Related Links NC General Assembly

The way you own your property may affect how it is distributed after your death. If you own property jointly with someone, you must know what your rights are in dealing with your interest in the property. Survivorship rules take precedence over what you have written in your will. A carefully designed estate plan can be defeated by failing to consider the forms of property ownership. It may be advisable to change the form of ownership to achieve your estate planning goals. To help your attorney develop your estate plan, make a list of your property. Provide copies of titles and deeds to help your attorney determine the form of ownership. Knowing how you own your property is necessary to develop an appropriate estate plan for you and your family. The checklist provided under Information Needed will help you compile the necessary information. Definition of "property" Ownership of property Tenants by the entirety Joint tenants with right of survivorship Tenants in common Life estates Remainder interests

Definition of "property"

Property is divided into two classes: real property and personal property. Real property consists of land and certain kinds of interests in land. Real property includes structures erected on the land, such as a house, fence, or garage. Personal property is everything that is not real property, such as cash, household items, goods, cars, jewelry, bank accounts, stocks and bonds.

Personal property is divided further into tangible personal property and intangible personal property. Tangible personal property is property that you can feel or touch, such as a chair or a watch. Intangible personal property is property that has no inherent value in and of itself, but represents something of value such a contract, certificates of stock, bonds, and promissory notes.

---

Ownership of property

Ownership or title is shown on a deed, certificate, bill of sale, contract, will, or other document. For real property, the document of title must be registered with the Register of Deeds in the county where the property is located. Ownership of personal property may be shown by automobile titles, receipts, contracts, bills of sale, bank records, stock certificates, etc. Without these documents, ownership of personal property may be difficult to prove. In some cases, possession of personal property is proof of ownership.

You may hold title to property by yourself or with other people. If your name is the only name on the document of title, you are the sole owner of the property. If your name and someone else's name appear on the document of title, your ownership rights may be limited by the rights of the other owner. The document of title creates the ownership rights of each owner, and shows whether the owners hold their interest in the property as tenants by the entirety, joint tenants with right of survivorship, or tenants in common. The document of title also shows whether someone's interest in the property is limited by a life estate or remainder interest.

---

Tenants by the entirety

Only a husband and wife may own real property as tenants by the entirety. Under the law, each spouse owns the entire interest in the property. However, neither spouse may sell, lease, or mortgage the property without the written consent of the other. This rule is based on the legal fiction that a husband and wife are the same person. Divorce automatically ends a tenancy by the entirety.

In North Carolina, a husband and wife have equal rights to the control, use, possession, rents, and profits of real property that they own as tenants by the entirety. If they file separate income tax returns, each spouse must report one half of the income or loss from the property. Creditors cannot take property held as tenants by the entirety for payment of a debt that is owed by only one spouse.

Upon the death of one spouse, the surviving spouse automatically owns the property. The property is not transferred by the will of the deceased spouse and is not probated in the deceased spouse's estate. If both spouses die at the same time, the property is split equally, with half probated in the estate of each spouse.

Tenancy by the entirety is a popular way for husbands and wives to co-own real property. It simplifies the transfer of ownership at death. However, some husbands and wives may find there are tax advantages to owning the property differently. To find out which form of ownership is right for your family, consult your attorney.

---

Joint tenants with right of survivorship

Two or more persons may own property as joint tenants with right of survivorship. Bank accounts, certificates of deposit and stock certificates are the most common types of personal property owned in this manner. Real property may also be owned jointly with a right of survivorship.

This form of ownership arises only by express agreement. The document creating the joint tenancy must expressly provide for the right of survivorship. For example, if you and your spouse open a joint bank account, you must choose whether you will own the account with or without a right of survivorship. If you choose without a right of survivorship, you own the account as tenants in common.

Upon the death of a joint tenant, the property automatically passes to the surviving joint tenant or tenants. The deceased joint tenant's will does not control who gets the property. Here is an example.

Mary is a widow with three children. Mary is afraid she may become ill and forget to pay her bills. She wants to give her youngest child, Jane, legal authority to write checks and make deposits on her account. She and Jane open a joint account with a right of survivorship. Mary sells her house and her farm and deposits the sale proceeds in her bank account. In her will, Mary leaves her property equally to her three children. When Mary dies, Jane becomes sole owner of the funds. Jane has no legal obligation to share the money with her brother and sister. Mary's will does not control who owns the money in the account.

In North Carolina, you can own a joint bank account with an "absolute" right of survivorship or with a "limited" right of survivorship. The difference is important upon the death of a co-owner. A surviving co-owner has easier access to a joint account with an absolute right of survivorship. Check with your bank for details.

---

Tenants in common

A tenancy in common means that two or more people own undivided fractional interests in the same property. For example, if three people own the property equally as tenants in common, each owns an undivided one-third interest in the property. Each co-owner has the right to use and possess the whole property, as long as other co-owners are not excluded. None of the co-owners may take any action with respect to the whole property without the written permission of the others. Together, they may sell, lease, mortgage, manage, or collect income from the entire property.

Generally, each may sell his or her undivided interest in the property without the permission of the other co-owners. The purchaser buys an undivided interest in the property, and the remaining tenants in common have a new co-owner.

Each co-owner may ask the court to order a partition or sale. The court may divide the property and give each co-owner his or her proportionate interest. Or, the court may order a sale of the whole property and divide the money between the co-owners.

When a co-owner dies, ownership of his interest is controlled by his will or by the laws that determine who gets his property if he dies without a will. His beneficiaries or heirs inherit undivided interests in his share of the property. Without proper planning, family property handed down through the generations may become unmarketable because there are too many owners.

---

Life estates

If you own a life estate, you are called the life tenant. You have the right to possess and use the property for the life of a specified person. Usually, a life estate is measured by the life of the life tenant, but it may be measured by the life of someone else. If so, the life tenant's interest ends upon the death of that person. Upon your death (or the death of a specified person), ownership passes to the person or persons who own the remainder. They are called remaindermen.

---

Remainder interests

If you own a remainder interest, you are called the "remainderman." A remainder interest is a future interest. It passes to the remainderman after an intervening interest, such as a life estate. For example, the person who inherits a remainder interest does not have a right to possess or use the property until the life estate ends, usually upon the death of the life tenant.

---

Prepared by Carol A. Schwab, J.D., LL.M.,
Professor and Extension Specialist, NC State University.

This publication is provided as a public service and is designed to acquaint you with certain legal issues and concerns. It is not designed as a substitute for legal advice, nor does it tell you everything you may need to know about this subject. Future changes in the law cannot be predicted, and statements in this publication are based solely on the laws of North Carolina in force on the date of publication.

Date: May 2000