How to take title: Joint Tenants with Right of Survivorship or Tenants in Common.
Joint Tenants with Right of Survivorship means that if one of you dies, the survivor owns all of the property automatically. No new deed needs prepared. The property goes to the survivor.
Tenants in Common means that each of you own half the property, and if someone dies, their half is distributed according to their Will. If they don’t have a Will, it goes to their heirs at law.
Don’t forget! You must talk to the attorney closing your settlement to tell them how you want to take title! Don’t assume anything.
You might owe Inheritance Tax if one of you dies: Even if you take title as Joint Tenants with Right of Survivorship, the survivor will owe inheritance tax on one-half the value of the property. The tax rate between two unmarried and unrelated individuals is 15% and is due within nine months of the date of death. This could be a hefty figure depending on the value of the property and the amount of any mortgage.
If you break up, there are no rights of Equitable Distribution: If you break up, and can’t decide how to split the real estate, or someone refuses to cooperate with selling the property, you have no rights under Pennsylvania Divorce Law or Equitable Distribution law. Your only option is to sue the co-owner by commencing a Partition Action. A Partition Action can be expensive and time consuming. Signing an agreement that sets out what happens if there is a break up can help a little bit, but if there is a steadfast refusal to cooperate, you could still end up in court.
Feel Free to call one of our real estate attorneys before buying property with your unmarried partner.