Holding Title with Rights of Survivorship
By Marc Shaw
John Smith and Mary Jones, a lovely couple, buy a house together, using the services of a reputable PA Title Insurance Company. They purchase an Owner’s Policy of Title Insurance to protect them from any possible unknown claims or issues, paying the all-inclusive, insurance premiums declared by the PA title insurance rating bureau. But John and Mary chose to take title as tenants in common, because the future is uncertain and what if their relationship didn’t last? But love prevails, and John and Mary get married. And they live happily-ever-after, right?
Alas, no. Poor John passes and now Mary is the owner of the real estate, right?
Alas, no again. As a tenant in common, Mary still only owns her half of the property and will now have to go through the cumbersome, time-consuming and very expensive process of probating John’s estate asking the court to give her John’s share because she’s his wife, for heaven’s sake! PA real estate law may allow Mary to receive John’s interest in the real estate, but the court must say so. And Mary may have to share if there are Smith children now in the picture. Get the picture?
If only John and Mary had consulted a Pennsylvania title insurance company or counsel once they were husband and wife. A reputable PA title company would have recommended that they file a new deed placing title to the real estate into themselves as husband and wife. PA real estate law provides for an AUTOMATIC transfer of title ownership from a deceased spouse to the survivor, without any need for probate or the courts, as long as the parties were not divorced at the time of death. Mary would automatically own the real estate entirely by herself without having to file any documentation or proof with the courts.
The cost involved to ensure this smooth and painless transfer? A few hundred dollars, maximum. The PA title insurance company or counsel will have a small document preparation fee, the notary public may charge a nominal amount to witness the signing of the deed, and the county recorder will charge up to $235.00 for recording the document (Most Counties are substantially less). There are no additional charges for title insurance as the coverage provided on the original owners policy of title insurance extends to the same parties once they are married and place title into their married names.
Remember, ensuring that married parties hold title to real estate as husband and wife provides for a seamless transfer of ownership if one spouse dies. And if John were to buy the property long before he knew Mary? If he files a new deed once they’re married, he’ll be providing the same protection to both of them if the unfortunate occurs, transfer tax exempt due to the marriage.
Keep this in mind when taking title via a tenancy in common early in a relationship.
Tenancy by the Entirety: Joint ownership of title by husband and wife, in which both have the right to the entire property, and, upon the death of one, the other has title (right of survivorship). Tenancy by the entirety is used in many states and is analogous to “community property” in the seven states which recognize that type of property ownership.
Tenancy in Common: Title to property (usually real property, but it can apply to personal property) held by two or more persons, in which each has an “undivided interest” in the property and all have an equal right to use the property, even if the percentage of interests are not equal or the living spaces are different sizes. Unlike “joint tenancy” there is no “right of survivorship” if one of the tenants in common dies, and each interest may be separately sold, mortgaged or willed to another. Thus, unlike a joint tenancy interest which passes automatically to the survivor, upon the death of a tenant in common there must be a probate (court supervised administration) of the estate of the deceased to transfer the interest (ownership) in the tenancy in common.