PROPERTY LAW BASICS: TITLING JOINT PROPERTY 101

Do you own real estate with other people?  How you title a property is important because it determines where the joint property goes when your co-owner(s) is no longer in the picture. 

Why is Titling Property Important?

Whether it is your spouse, a business partner, or otherwise, the relationship with your co-owner(s) impacts how you title the property and what happens when the other party is gone. Choosing the correct way to title a property is an important consideration with each new real estate transaction.

With a Spouse.  Most commonly, individuals purchase property with their spouse.  It is important to note that there are different systems for classifying property between married couples. For our purposes we will focus on Wisconsin law. If you are not a resident of Wisconsin, you should reach out to a professional in your state to determine the property laws that apply to you.

Wisconsin follows a set of laws known as marital property.  If you and your spouse are Wisconsin residents, property owned by either spouse acquired after January 1, 1986, is marital property, unless you take steps to title it differently.  For instance, if one spouse purchases a home and titles the home in his or her individual name, the house is still deemed marital property owned by both spouses.  Not surprisingly, there are a few exceptions.

Married individuals may own property individually, including property acquired before marriage, acquired by gift or inheritance, or classified as individual property by written agreement between them.

Marital property, by default, converts into tenancy-in-common property upon the death of either spouse.  This means that the deceased spouse’s interest in the marital property becomes a part of their estate and is distributed according to his or her estate plan. [1]  The beneficiaries of the deceased spouse’s estate only inherit the deceased spouse’s interest at that time.  Accordingly, the surviving spouse keeps his or her one-half interest in the marital property and their one-half interest will be distributed according to their estate plan when they die.

The default designation of marital property can be removed by titling marital property with the words “survivorship marital property". [2]  By using this language, upon the death of one spouse, the one-half ownership rights of the deceased spouse transfer automatically to the surviving spouse.  The surviving spouse remains the owner of the entire property, eliminating any distributions or transfers at that time.  This is also accomplished with a Marital Property Agreement, a common document in any good comprehensive estate plan. These techniques can be useful in preventing additional time and costs spent transferring the property because it will only be transferred once after the death of the surviving spouse.

With a Business Partner or Otherwise.  Typically, there are two main options for titling property with a non-spouse: tenancy-in-common and joint tenancy.

Tenancy-in-Common.  Tenancies-in-common are the default designation, unless the property is clearly titled otherwise.  In this situation, each co-owner owns a fractional interest in the property.  Unlike joint tenants, tenants-in-common may have unequal interests. 

In this situation, when a co-owner dies, their interest in the property becomes a part of their estate and is transferred according to his or her estate plan.  The beneficiaries of the co-owner’s estate inherit only the portion of the property the decedent owned.  The other owner(s) maintain ownership of their respective interests in the property.  This impacts the sale of the property down the road.  The ownership interests can become smaller and smaller and may be owned by more and more individuals as it is passed down.  This can get very complicated quickly (and messy).

Joint Tenancy.  In a joint tenancy, two or more people own equal shares of the property.  Similarly to the right of survivorship in marital property, ownership interests in the property automatically transfer equally between surviving owner(s) upon the death of a co-owner.  The surviving owner(s) maintain ownership of the entire property.  The property is not transferred according to an estate plan until the last remaining owner passes or the remaining owners sell the property.

Key Takeaway.  When purchasing property with your spouse, business partner, or otherwise, it is important to be intentional about titling your property as it relates to your relationship with other co-owners, your goals, and/or personal estate plan.

[1] §861.01(1)

[2] §766.60