An interest in real property describes the legal rights a person has in land or buildings. Five common types of interests are:
- Fee Simple Absolute: The most complete form of private ownership. The owner generally has the right to possess, use, sell, give away, or leave the property to heirs, subject to laws and restrictions affecting the property.
- Life Estate: The holder has the right to possess and use the property for the duration of a specified person's life. When that life ends, ownership passes to the person holding the remainder or reverts to the grantor.
- Leasehold Estate: A tenant receives the right to possess and use property for a particular period under a lease, while ownership remains with the landlord.
- Easement: The right to use another person's land for a particular purpose without owning it. A common example is an easement allowing someone to cross another person's property to reach a road.
- Profit: A nonpossessory interest allowing a person to enter another's land and remove something from it, such as timber, minerals, or other natural resources.
The three forms of co-ownership differ significantly.
Tenancy in Common: Each co-owner has an undivided ownership interest in the property. The ownership percentages do not necessarily have to be equal. There is ordinarily no right of survivorship. When one owner dies, that person's interest passes according to a will or applicable inheritance law rather than automatically to the other co-owner.
Joint Tenancy: The co-owners hold the property together with a right of survivorship when properly created. When one joint tenant dies, that person's interest generally passes automatically to the surviving joint tenant or tenants instead of passing through probate.
Tenancy by the Entirety: This is a special form of ownership available to married couples in jurisdictions that recognize it. The spouses hold the property together as a marital unit, generally with a right of survivorship. When one spouse dies, the surviving spouse automatically owns the entire property. It can also provide protections against certain creditors of only one spouse, although the rules vary by state.
For a married couple whose specific goal is for the home to pass automatically to the surviving spouse without probate, tenancy by the entirety is often an excellent choice where state law permits it. It combines survivorship with protections specifically designed for married couples.
If tenancy by the entirety is unavailable, joint tenancy with right of survivorship can accomplish the same basic probate-avoidance goal.
The exact rules governing these property interests vary by state, so the couple should ensure that the deed uses the language required by the law of the state where the property is located.
