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There is more than one way to hold title to real property. Clients usually have one of two concerns when they inquire about this – first, they may be concerned with matters of inheritance and probate avoidance – who gets the property when one co-owner dies (rights of survivorship) and whether or not a court proceeding will be required; or second, a client may wish to "add" another person to a deed (which unfortunately is not that simple – see below).

When it comes to the inheritance issue, this is governed by (1) express language in the deed; (2) a last will and testament; or (3) in the absence of express language in the deed or a last will and testament, by intestacy provisions of the Probate Code. Depending on the circumstances, a co-owner may have no survivorship rights at all. This comes as a surprise to many clients.

In Texas, co-ownership is usually referred to as either "tenancy in common" or "joint tenancy." In this context, disregard the common meaning of the terms "tenant" and "tenancy." Traditional legal language can be arcane and misleading. We are referring to owners here, not renters.

Many people assume that if they own their home together with their spouse that the surviving spouse will inherit the home when the other one dies. This is not necessarily true. It is first necessary to determine if the deceased spouse died "testate" (with a will) or "intestate" (without a will). If a spouse dies intestate, property automatically vests 100% in the surviving spouse only if the property is community property and the deceased had no children or, if there are children, all of them are the result of the marriage between these two spouses (i.e., there are no children from a prior marriage). See Texas Probate Code Sec. 45 for more details.

Texas law presumes that if two non-spouses are named as co-owners (grantees), and nothing more is said, then they are "tenants-in-common." This means they each person owns an undivided one-half interest in the property but there is no automatic right of survivorship. When one co-owner dies, the interest of the deceased co-owner goes directly to that person´s heirs – either by will or by intestate succession (i.e., according to the Probate Code) – not to the other co-owner.

So how are survivorship rights created? Probate Code Sec. 46 states that "The joint owners may agree in writing, however, that the interest of any joint owner who dies shall survive to the surviving joint owner or owners, but no such agreement shall be inferred from the mere fact that the property is held in joint ownership." The simplest way to accomplish this agreement in writing is to recite language in the deed which expressly confers rights of survivorship. This language must be included at the time that both persons receive their interest in the property. If the required language is included, a joint tenancy is created, which will result in the surviving co-owner automatically inheriting the interest of deceased owner – without necessity for probate or other legal action. This is true even if the co-owners are not spouses.

An example of a grantee clause that creates joint tenancy is "John Smith and wife, Mary Smith, as joint tenants with rights of survivorship and not as tenants in common." The intent and agreement of the co-owners is stated plainly. This achieves a survivorship arrangement that has been dubbed the "poor man´s will."

Probate Code Sec. 47(d) imposes a caveat: in order for a joint tenant to inherit, the survivor must survive the deceased by at least 120 hours. If this does not occur, then "these assets shall be distributed one-half as if one joint owner had survived and the other one-half as if the other joint owner had survived."

Note that if property is currently held by two persons as tenants-in-common, they can convert this to joint tenancy by means of a survivorship agreement as provided in Probate Code Sec. 46. However, this method does not physically change the warranty deed that may be on file at the time, and many clients are looking for just that – a single title document that contains both names.

Of course, even if a deed contains no survivorship language, each co-owner may make his or her wishes clear by executing a valid will that provides for inheritance of the deceased´s interest in the property. The Probate Code is "fallback" that comes into effect by default – its intestacy provisions govern only in the absence of a will. Failing to make a will is equivalent to requesting that the State of Texas determine how your property will be disposed of (See Probate Code Sec. 38 et seq.).

When buyers arrive at the title company to close, they are often handed an "assembly line" deed (prepared by title company attorney they have never met) that contains no extra clauses favorable to them (unless, of course, their own attorney is assisting them with the purchase). This is unfortunate, since a warranty deed is qualitatively different from the routine forms and disclosures that title companies prepare. It is the sole document that evidences title to the property and may also set forth conditions upon which the buyers are taking ownership. It is far more important than, say, a MUD disclosure.

Since a home is usually a family´s biggest asset, it is worth the extra effort to customize the warranty deed so it suits the purposes of the owner. However, title companies are insurance companies; by definition, they and their attorneys look out for themselves, not for you. It is astonishing how many people naively believe that the title company is concerned with their best interests and will draft documents accordingly. Not so.

If buyers want to hold title as joint tenants with rights of survivorship, they must specifically ask in advance of the closing that appropriate wording be included in the deed. Ideally, this intent should be reflected on the earnest money contract they sign to purchase the property. This is a good reason to involve a real estate lawyer early on in the process.

So what happens if a person dies both without a will and without a joint tenancy clause in their deed? Legal issues may arise as to which persons now have title to the property and in what percentages. Again, the Probate Code must be consulted to determine what rights the heirs have.

Such property is often referred to as "heirship property." It is essentially un-sellable, except privately by means of a deed without warranties or a quitclaim (Note that a "quitclaim deed" is not truly a deed at all, and that title companies will generally not insure a chain of title that contains a quitclaim). It is therefore usually necessary to obtain the services of a real estate attorney to clear title to heirship property.

A title company will not issue title insurance until heirship issues are first addressed and resolved. This must be done by either a probate proceeding in county court (resulting in appointment of a personal representative of the estate of the deceased), or by an affidavit of heirship followed by a curative deed signed by the heirs. The affidavit of heirship recites relevant facts concerning family history, identifies the heirs, and is usually signed by a family member with personal knowledge. The curative deed is then signed by all the heirs. This consolidates title into a single heir who may then keep the property or sell it (this may be easy or difficult, depending on whether the various heirs are willing to sign). Both documents are filed in the proper order in the real property records. For more information on this process, see our related article on this site entitled Affidavits of Heirship and Curative Deeds in Texas.

Occasionally, clients will ask that another person be "added" to their deed so that this other person will have co-ownership and inheritance rights. There are two methods:

1. In the first method, the existing owner can execute a deed to the other person for a percentage of ownership (e.g., 50%). The result is that each person becomes a co-owner, although this status is reflected in two documents, not one. Again, Texas law presumes that the two persons here are tenants in common.



2. The second method is for the owner to transfer the property out to some third party (for example, the attorney or some other trusted individual) who then transfers the property back into the two desired names. This way (and only this way) both names wind up on the same piece of paper.

Either way, the legal effect is the same. The difference is cosmetic

However – and this is a big however – if the intent is to achieve joint tenancy with rights of survivorship, then this must be created at the inception of the transaction, i.e., when the property is taken by both persons simultaneously. Therefore, the second method described above is the only way to achieve this - title must be conveyed out to a third party and then conveyed back into the two persons as joint tenants with rights of survivorship. This requires two deeds which are filed back-to-back in the real property records – out, then back in to the two individuals as joint tenants. This sounds cumbersome, but there is no other way to do it.

Regardless of whether the result is tenancy in common or joint tenancy, the "added" person does not become liable on the loan on the property. Liability on a loan occurs only when a person signs a note to the lender. No signature on a note, no liability to the bank.

If a client wants to add someone to a deed, then he or she should let the attorney know which of the two above methods is preferred; provide a copy of the existing warranty deed to the property; and supply all pertinent names, addresses, and marital status (since Texas is a community property state).

Lawyers are occasionally asked if multiple persons can own property in varying percentages, and the answer is yes. If one person owns 60%, another owns 20%, and a third owns 20%, then it would be correct to specify these percentages when these individuals take title to the property. Alternatively, the three individuals could form an entity (e.g., an LLC or a trust) to hold title, and the LLC company book would reflect the varying membership interests or, if a trust is used, the varying beneficial interests. In this situation, an LLC would be preferred if the parties are concerned with potential liability; a trust if the principal concern is anonymity.

There is another and superior alternative: an inter vivos or living trust, which achieves the objectives of joint tenancy and more. A living trust is designed to hold property (primarily real estate) during the life of the trustor (the person conveying the property into trust) in order to avoid probate and reduce estate/inheritance taxes at the time of the trustor´s death. It is a tried and true means of avoiding probate court and, if the trustor is married, skipping a taxable event upon the death of his or her spouse. It can also achieve a certain level of anonymity of property ownership, contributing to asset protection, while preserving benefits attributable to the Texas homestead. See our companion article Living Trusts in Texas for more information. This firm has a Living Trust Checklist which a client will need to fill out in order to begin the process.