With price tags of vacation condominiums, boats and many other desirable items so substantial these days, more and more Americans seriously are considering joint ownership.
This makes sense, at least in concept, because together you'll have a much easier time pooling the necessary initial dollars and paying ongoing expenses.The drawback, however, is that some arrangements are so loosely put together that they unravel almost immediately, causing considerable financial stress and persistent disagreements that can transform friends into former friends.
It isn't necessary to go to a lawyer in all cases, but everything should be talked out and spelled out before you buy.
"If you're buying a boat, you can simply have a letter agreement between the owners because there are no big tax considerations and such arrangements seldom wind up in court," said Paul E. Roberts, a New York City attorney who is on the supervisory council of the real property probate and trust section of the American Bar Association.
"However, if you're going to own real estate, you may need a lawyer because of the technicalities of owning title and the greater degree of documentation required by lenders before a loan will be approved."
Keep in mind that when you're not the sole owner, you aren't able to deal with the property in exactly the manner you may wish, Roberts cautioned.
"It pays to sit down and brainstorm to come up with all of the possible problems that could arise from joint ownership so you can anticipate them," advised Barbara Pope, tax partner with Price Waterhouse. She said expenses, including interest, usually are divided equally. "One big consideration might be what rights the children of the partners will have in use of the property."
Understand different types of joint ownership and, importantly, your state's particular laws. Tenancy in common, for example, is considered best for unmarried partners. People who hold property as tenants in common can own equal or unequal shares. They can sell their interest without discussing it with the other tenants and can decide who gets their share when they die.
People buying either a condominium or home as tenants in common should have their attorney draft a special agreement defining each person's financial obligations and percentage of ownership, said Roberts. This should also give each owner the right to buy the other's share if they are no longer partners. The couple can also name each other in their wills as heir to their part of the property.
While joint tenancy with right of survivorship is more common between spouses, it can be appropriate for others. Usually, if one tenant dies, ownership of his share automatically passes to the surviving joint tenant or tenants. It's vital to make all intentions perfectly clear and consistent in the will and in titles to all joint property.
Each owner controls his or her share of a joint tenancy and can dispose of it independently. Because of this, creditors can seize a delinquent debtor's individual share of joint property, and, in the case of real estate, the other owners might then be forced to sell.
There are also considerably more involved joint ownership arrangements involving partnerships and corporations.
"Really know the individual with whom you'll be co-owning in this long-term relationship," counseled Thomas Adamo, a vice president at Chemical Bank. "Have the names of all owners on the title, so that if there's a default situation or other problems it won't land completely on the shoulders of the one person on the title."
With the right people and the right agreement, joint ownership permits you to enjoy something better than what you could afford individually.