Real estate ownership can be structured in several ways, each with important legal and financial consequences at the time of an owner’s death. One of the most common forms of co-ownership is tenancy in common (“TIC”). Unlike joint tenancy, which carries a right of survivorship, tenancy in common allows each owner to hold an individual, undivided interest in the property that does not automatically pass to the surviving co-owners. This feature significantly affects how the property is managed, transferred, and inherited after a co-owner’s death.

Individual Ownership Interest:

Under a tenancy in common arrangement, each co-owner possesses a separate ownership share, which can be equal or unequal. Importantly, these shares are freely transferable during life or upon death. When one tenant in common dies, their share becomes part of their estate and is subject to probate unless otherwise directed through estate planning tools such as a will or trust. This is a key distinction from joint tenancy, where the property bypasses probate and automatically vests in the surviving owner(s).

Probate and Administration:

Because a deceased tenant in common interest is considered part of their probate estate, the executor or administrator must account for it during the estate settlement process. This can delay access to the property and potentially complicate its use, especially if heirs or beneficiaries have conflicting interests with the surviving co-owners. In cases where the decedent died intestate (without a will), state intestacy laws dictate how the interest passes, which may lead to unintended outcomes, such as distant relatives inheriting a share of the property.

Impact on Survivors:

Surviving tenants in common do not automatically increase their ownership share upon a co-owner’s death. Instead, they may find themselves co-owners with the deceased’s heirs, legatees, or devisees. This can create challenges, particularly if the new co-owners do not share the same vision for the property’s use. For example, some may wish to sell, while others prefer to retain the property for personal or investment reasons. In extreme cases, disputes can result in partition actions, where a court orders the property sold or divided.

Holding Investment Real Property as Tenants in Common: When One Unmarried Owner Dies Without a Will

When two unmarried individuals purchase investment real property together as tenants in common (TIC), they each hold a distinct, undivided ownership share. In this scenario, where one person dies prematurely without a will (intestate), the legal and financial effects can be complex.

1. The Deceased’s Share Passes Through Intestacy

Because there is no will, the deceased’s share becomes part of their probate estate. State intestacy laws will determine who inherits the ownership interest. Typically:

• If the deceased was unmarried and had children, their share passes to their children.
• If no children, it might pass to parents, siblings, or other relatives depending on state law.
• The surviving partner (because they were not married) has no automatic legal claim to inherit the share unless specifically provided for in law or recognized through another planning device.

This can leave the surviving co-owner in business with the deceased’s heirs, even if they had no prior relationship.

2. Probate Complications

Since the share must pass through probate, the property interest is tied up until the court process is completed. This delays clarity on ownership and can create uncertainty regarding property management, rent collection, or decisions to refinance or sell.

The surviving tenant in common may also find themselves dealing with multiple new co-owners if several heirs inherit the deceased’s portion.

3. Potential Conflicts for the Surviving Owner

The surviving partner continues to own their share, but now faces several possible challenges:

• Co-ownership disputes: The heirs may want to sell the inherited interest quickly, while the surviving co-owner may prefer to hold the property long-term.
• Partition action: If the parties cannot agree, heirs may force a sale of the entire property through a court-ordered partition.
• Loss of control: The surviving co-owner may no longer have aligned goals for investment, management, or use of the property.

4. Financial and Tax Considerations

• Step-up in basis: The deceased’s share receives a step-up in tax basis to fair market value at death, which can reduce capital gains tax if the heirs later sell. The surviving co-owner’s basis does not change.
• Estate administration costs: The estate bears probate costs and possibly estate taxes if applicable. These do not affect the surviving co-owner’s share directly, but disputes over expenses can spill over.

5. Estate Planning Lessons

This scenario highlights the importance of estate planning for unmarried couples who purchase real property together. Without a will or trust:

• The surviving partner has no legal guarantee of inheriting the deceased’s share.
• The deceased’s heirs, not the partner, may become co-owners.
• The property may end up sold through partition, undermining the investment purpose.

To avoid these issues, unmarried couples often consider:

• Joint tenancy with right of survivorship (JTWROS), which allows the surviving owner to inherit automatically.
• A written co-ownership agreement, addressing what happens upon death or incapacity.
• A will or living trust, designating the partner as beneficiary of the share.

Estate Planning Considerations:

Tenancy in common provides flexibility for estate planning, as it allows each co-owner to direct their share according to their wishes. This can be advantageous for individuals who want to leave their interest to children, charities, or other beneficiaries. However, it also means careful planning is necessary to prevent disputes. Using a revocable living trust to hold a tenant in common’s share can allow for smoother transitions, avoid probate, and establish clear management terms.

Tax Implications

At death, a tenant in common’s interest typically receives a step-up in basis, meaning the property’s value for tax purposes resets to the fair market value at the date of death. This can reduce capital gains tax if the heirs later sell the property. However, estate tax implications depend on the size of the decedent’s estate and applicable state and federal laws.

Holding real estate as tenants in common at death has significant legal and financial effects. The deceased’s share becomes part of their estate, subject to probate, and may introduce new and sometimes unexpected co-ownership relationships. While this form of ownership offers flexibility in directing property interests, it can also lead to complications without careful planning. For those holding real estate as tenants in common, integrating the property into a comprehensive estate plan is essential to ensure smooth transitions and minimize potential conflicts for heirs and surviving co-owners.

If you’re unsure whether your structure fits your long-term goals, let’s review it together. Schedule a call here.

For Informational Purposes only and not for legal or tax advice.

About the Author – Marie Feindt, JD 

Marie Feindt is the Planning Specialist – Estate Attorney at Members’ Wealth, a boutique wealth management firm that offers a comprehensive and holistic approach to serving individuals, families, business owners, and institutions. The firm’s goal is to preserve and grow its clients’ wealth to endure over time, while thoughtfully evolving its strategy to suit an ever-changing world. With over 20 years of estate planning experience, Marie and the Members’ Wealth team thrive on bringing clarity and confidence to clients’ unique situations. She believes everyone, young adults and older, need the essential documents to conserve and preserve and transfer assets accumulated during lifetime to the next generation.

Marie received her JD from Widener University School of Law, her bachelor’s degree from Penn State University, University Park and is currently enrolled in the Villanova University Charles Widger School of Law Graduate Tax Program.

Marie is an Adjunct Faculty at the Villanova University College of Professional Studies Paralegal Professional Certificate Program where she teaches Estates & Trusts and Civil Procedure & Litigation and Torts & Personal Injury Law.

Marie volunteers for a monthly legal clinic at The Salvation Army in Chester, PA facilitated by the Christian Legal Clinic of Philadelphia. She has served on the Women’s Commission of Delaware County and as a Board Member for the Delaware County Literacy Council.

Marie enjoys biking, reading, yoga and walking in her free time with her husband and three children.

To get in touch with the Members’ Wealth team today, I invite you to email info@memberswealthllc.com or call (267) 367-5453. 

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