More people today are choosing to buy property with friends, romantic partners, business associates, or others outside their immediate family. Whether it’s a shared vacation home, investment property, or primary residence, co-owning real estate with non-relatives can be a smart financial move—but it adds complexity when it comes to estate planning.
Unlike traditional family-based ownership, property held with non-relatives needs extra planning to avoid complications down the road. Without a proper estate plan, your share in the property could end up in probate or pass to someone you didn’t intend.
Understand Your Ownership Structure
When you co-own property with someone, the way the title is held matters significantly for estate planning. In most cases, there are two primary forms of co-ownership:
- Tenants in Common (TIC): Each owner holds a specific share of the property (which doesn’t have to be equal). Upon death, that share passes according to the owner’s will or trust—not automatically to the other co-owner.
- Joint Tenancy with Right of Survivorship (JTWROS): Each owner has an equal share, and upon the death of one, their interest passes directly to the surviving owner, bypassing probate.
Understanding your current title and revising it if necessary is a crucial first step. Many co-owners who assume equal rights to the property may not realize their estate planning goals could be undermined by how the title is structured.
Create a Co-Ownership Agreement
Even among close friends or partners, co-owning property can lead to disagreements. A co-ownership agreement can outline each person’s rights and responsibilities. This legal document should address:
- Each owner’s financial contributions
- How expenses (mortgage, taxes, maintenance) are shared
- What happens if one owner wants to sell or exit
- Use of the property (primary residence, rental, vacation)
- Dispute resolution methods
Having a written agreement in place protects all parties and gives your heirs clear guidance about what should happen with your share of the property after your death.
Include the Property in Your Estate Plan
If you own property as tenants in common, your share becomes part of your estate. That means you need to include it in your will or trust to control who inherits it and how it will be managed.
Leaving your share to your co-owner may be appropriate if that’s your intention, but if you want it to go to a family member, partner, or another heir, you need to be explicit in your estate planning documents. Consider the following options:
- Will: Directs how your share will be distributed, but may involve probate.
- Revocable Living Trust: Avoids probate and allows for faster and more private distribution.
- Transfer-on-Death Deed (if allowed in your state): Automatically transfers your interest to a named beneficiary upon death.
Prepare for Potential Conflicts
What happens if your heir inherits your share and doesn’t want to continue co-owning the property with your friend or business partner? That scenario can lead to forced sales or legal disputes.
To avoid that, your estate plan should address:
- Whether your share should be offered to the co-owner first (right of first refusal)
- Whether the heir must agree to existing co-ownership terms
- Buyout terms and valuation methods if one party wants out
Working with an estate planning attorney can help you structure these provisions in a way that minimizes the potential for conflict.
Consider Using a Trust or LLC
For more complex arrangements—especially if the property is income-producing or owned by multiple parties—placing the property into a trust or forming a limited liability company (LLC) may be beneficial.
- A trust allows you to manage how your share is handled, keep it out of probate, and appoint a trustee to oversee your interest after your death.
- An LLC provides a formal structure for ownership, helps shield personal assets from liability, and allows you to create a clear succession plan through the operating agreement.
Either option can provide structure, continuity, and protection—especially if your heirs are not interested in managing property alongside non-family co-owners.
Communicate with Your Co-Owner
Estate planning doesn’t happen in a vacuum. If you co-own property, it’s important to communicate your intentions with the other party. Coordinating your estate plans, or at least informing each other of your goals, can reduce surprises and disagreements later.
If both parties are aligned, you may be able to set up mirror trusts or a joint plan that ensures continuity and clarity for your heirs and any shared interests.
Conclusion
Co-owning property with friends, partners, or other non-relatives can be rewarding, but it requires proactive estate planning to prevent complications later on. The right legal structures and documents can protect your investment, clarify your intentions, and provide a smoother transition for those you leave behind.
Speak to an Attorney
Contact the Law Offices of Juliet Cohen, P.C. for advice on estate planning. Our experienced attorneys can help you develop a personalized plan that safeguards your assets and provides for your family’s future.
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