There are five main types of real estate ownership to choose from when your name goes on a deed: sole ownership, joint tenancy, tenancy in common, tenancy by the entirety, and—in certain states—community property. The one you pick controls who can sell the property, who inherits it when an owner dies, whether a co-owner’s creditors can reach it, and how much tax is owed when it is eventually sold. Picking the wrong one, or letting the default apply by accident, can cost heirs years in probate or thousands in avoidable taxes.
Sole Ownership
Sole ownership means one person, or one legal entity, holds the entire title. Lawyers sometimes call this “ownership in severalty.” The owner can sell, lease, mortgage, or give away the property without anyone else’s sign-off, which is why individual investors and businesses often prefer it.
The trade-off shows up at death. A solely owned property almost always passes through probate, the court-supervised process that confirms heirs, pays bills, and distributes what is left under a will or the state’s default inheritance rules. Probate can take many months and generate meaningful legal fees. Many sole owners sidestep this by transferring the deed into a revocable living trust during their lifetime, which lets the property pass to beneficiaries without probate.
Entities as Sole Owners
A property can also be solely owned by an LLC or a trust rather than an individual. An LLC puts a legal barrier between the property and your personal assets: if someone is injured on the property and sues, typically only the LLC’s assets are at risk. A trust offers privacy, because the trust name appears on public records instead of yours, and lets the property skip probate when the trust’s creator dies.
Joint Tenancy
Joint tenancy lets two or more people hold equal shares of a property at the same time. Creating a valid joint tenancy requires four conditions, often called the “four unities,” to exist when the deed is executed:
- Time: all owners acquire their interest at the same moment.
- Title: all owners take their interest through the same deed.
- Interest: each owner holds an equal share.
- Possession: every owner has the right to use the entire property.
If any unity is missing when the deed is created, or is later destroyed, the joint tenancy fails or ends.1Legal Information Institute. Joint Tenancy
The defining feature is the right of survivorship. When one owner dies, their share automatically passes to the surviving owners rather than to their heirs or estate. The survivors’ shares grow proportionally, and the deceased owner’s interest simply disappears.2Legal Information Institute. Right of Survivorship The transfer happens outside probate; survivors typically file a death certificate and a short affidavit with the county recorder.
How Joint Tenancy Breaks
If one joint tenant sells or transfers their share to an outsider, the four unities are destroyed because the new owner received their interest through a different document at a different time. The joint tenancy is severed as to that share, and the new owner becomes a tenant in common with the remaining original owners.1Legal Information Institute. Joint Tenancy The remaining original owners still hold joint tenancy between themselves, but the newcomer has no survivorship rights with them.
Tenancy in Common
Tenancy in common is the most flexible form of shared ownership and the default in most states when a deed names multiple owners without specifying a vesting type. Co-owners do not need equal shares. One person might hold 70 percent and another 30 percent, reflecting unequal contributions to the purchase.3Legal Information Institute. Tenancy in Common
There is no right of survivorship. When a co-owner dies, their share passes under their will or, if none exists, under state inheritance law—not to the surviving co-owners.3Legal Information Institute. Tenancy in Common That makes tenancy in common the standard choice for business partners, friends, or family members who want their stake to benefit their own heirs.
Each co-owner can independently sell, gift, or mortgage their percentage without the others’ consent. The property is also exposed to each owner’s creditors. A lien against one owner’s share does not automatically reach the other shares, but it can create real problems if the property later needs to be sold or refinanced.
Partition When Co-Owners Disagree
If tenants in common (or joint tenants) cannot agree on whether to sell, maintain, or use the property, any co-owner can file a partition action in court. A partition is a legal proceeding that ends the shared ownership.4Legal Information Institute. Partition Courts handle it two ways:
- Partition in kind, where the court physically divides the property into separate parcels. This works for large tracts of land that can be meaningfully split.
- Partition by sale, where the court orders the whole property sold and divides the proceeds by ownership percentage. This is used when a physical split would destroy value, which is the usual case for a house or commercial building.
Partition by sale is far more common for residential real estate, and it is expensive and slow enough that co-owners often negotiate a buyout before filing.4Legal Information Institute. Partition
Tenancy by the Entirety
Tenancy by the entirety is available only to legally married couples and is recognized in roughly half the states plus the District of Columbia. If your state does not recognize it, the deed is typically treated as a joint tenancy or tenancy in common instead. Like joint tenancy, it carries a right of survivorship: when one spouse dies, the other automatically owns the whole property without probate.5Legal Information Institute. Tenancy by the Entirety
What sets this form apart is the protection it provides during the marriage. Neither spouse can sell, transfer, or mortgage the property without the other spouse’s written consent.5Legal Information Institute. Tenancy by the Entirety It also offers creditor protection: in states that recognize it, a judgment against only one spouse generally cannot attach to the property at all. The exception is a judgment against both spouses together.
The protection lasts only as long as the marriage. On divorce, the tenancy by the entirety ends and ownership typically converts to a tenancy in common, with each former spouse holding half.
Community Property
Nine states follow community property rules: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Most property acquired during the marriage is owned equally by both spouses regardless of whose name is on the deed. Five additional states—Alaska, Florida, Kentucky, South Dakota, and Tennessee—allow couples to opt in, usually through a community property trust.
Under standard community property rules, each spouse owns a 50 percent interest, and that share does not automatically pass to the survivor at death. It goes through probate or follows the deceased spouse’s will, much like tenancy in common. Many community property states offer a variant called community property with right of survivorship, under which the surviving spouse automatically inherits the deceased spouse’s half and bypasses probate.6Legal Information Institute. Community Property With Right of Survivorship
The biggest reason to use community property ownership is a federal tax benefit explained below.
How Ownership Type Affects Taxes at Death
When you inherit property, your cost basis—the starting point for calculating capital gains when you later sell—is generally reset to fair market value as of the prior owner’s date of death.7Internal Revenue Service. Basis of Assets This “step-up in basis” can wipe out decades of appreciation from the tax calculation.
How much of the property gets the step-up depends on the vesting. With joint tenancy between non-spouses, only the deceased owner’s share is reset. If two friends each owned half and one dies, the survivor’s half keeps its original basis. Tenancy in common works the same way: only the deceased co-owner’s percentage is adjusted.
Community property is treated differently under federal tax law. When one spouse dies, both halves of community property receive a step-up to fair market value.8Office of the Law Revision Counsel. 26 USC 1014 – Basis of Property Acquired From a Decedent This “double step-up” can save a surviving spouse tens or even hundreds of thousands of dollars in capital gains tax on a highly appreciated home, and it is the main financial reason to choose community property vesting where it is available.
One exception to the step-up rule is worth knowing. If you give appreciated property to someone and that person dies within one year and leaves it back to you or your spouse, no step-up applies. Your basis stays what it was before the gift.7Internal Revenue Service. Basis of Assets This blocks last-minute gifts to a terminally ill relative made solely to harvest a stepped-up basis.
Choosing the Right Ownership Type
No single vesting is best in every situation. The right one depends on your relationship to any co-owners, your state’s laws, and your estate-planning goals.
- Married couples in community property states usually benefit from community property with right of survivorship, which combines probate avoidance with the double step-up in basis. No other vesting offers both.
- Married couples in other states often prefer tenancy by the entirety where it is available, mostly for the creditor protection it adds on top of survivorship.
- Unmarried co-owners who contribute equally and want survivorship rights may choose joint tenancy, keeping in mind that one owner selling to an outsider will sever the arrangement.
- Business partners and unrelated co-investors generally choose tenancy in common so shares can reflect actual contributions and pass to each owner’s own heirs.
- Sole owners who want to spare heirs the cost of probate should look at pairing sole ownership with a revocable living trust rather than relying on a will alone.
Because the default in most states is tenancy in common whenever the deed is silent, confirm that the deed language matches what you actually want before closing. Changing a vesting type later means recording a new deed, with the extra cost and complication that goes with it.