Reading a real estate deed can be confusing. The deed usually contains a lot of “legal language,” along with the legal description of the property, which is a confusing jumble of measurements and directions. However, one of the most important parts of the deed is the identification of ownership rights, which usually requires only a few words.
Property in Michigan can be owned in several ways. The simplest way is sole ownership by a single person. If the deed states that the property is owned by “John Smith, a single man,” this establishes title as sole ownership. If John Smith passes away, the property must be transferred through the probate process, as there is no surviving owner of the property.
One of the most common means of property ownership is joint tenants with rights of survivorship. In this type of property ownership, two or more people all own the property jointly and equally. On the death of one owner, the remaining owners automatically gain the decedent’s interest in the property. Each joint tenant has an equal and undivided right to possess the whole property, and all owners’ consent is required to sell the property. Joint owners may be family members, but there is no requirement that there be a family relationship to enter into joint ownership of property.
Michigan also recognizes a form of joint ownership with rights of survivorship for married couples, called Tenancy in the Entirety. Each spouse owns a one-half interest in the property, but neither spouse can sell the property without the consent of the other. If one spouse passes away, the surviving spouse automatically receives all legal interest in the property.
Lastly, property can be owned as Tenants in Common. As Tenants in Common, two or more persons own the property at the same time, however, their ownership interests and their right to use or possess the property does not have to be equal. For example, two people purchase a cottage together as Tenants in Common. One person pays 75% of the purchase price, and the parties agree that he gets use of the property 75% of the time. The other party pays 25% of the purchase price, and has the right to use the property 25% of the time. Neither party can sell the entire property without the consent of the other, however, the owner could sell their ownership interest to another – for example, the 25% owner could sell his 25% share to another. There is no right to survivorship with Tenants in Common, instead, upon death, the ownership interest passes to the owner’s legal heirs through the probate process.
These different types of ownership interests are important to understand what rights you may have to the property while you are living, and how that property will transfer upon your death. When purchasing property, you should ensure that the deed reflects the proper ownership type to avoid questions or issues in the future. Also, when doing estate planning, you should consider whether transferring ownership interests to your children as joint tenants or tenants in common will serve your estate plan goals. Considering these issues can help prevent problems regarding ownership disputes in the future.