Owning property with another person sounds simple. Two siblings buy a vacation home together, business partners acquire a building, or children inherit the family ranch from their parents. Each person owns part of the property, and as long as everyone agrees about what to do with it, there may be little reason to think about the legal structure underneath that ownership.
But shared ownership creates its own estate planning questions, particularly when the property is held as tenants in common.
Tenancy in common allows two or more people to own separate interests in the same property. Those interests do not have to be equal. One owner might hold 50 percent while two others each own 25 percent, but none of them necessarily owns a particular physical portion of the property. Their ownership is instead an undivided interest in the whole.
The important estate planning distinction is what happens when one of those owners dies. A tenancy in common does not itself create a right of survivorship. The deceased owner’s interest does not automatically become the property of the other owners. Instead, that interest remains part of the deceased owner’s estate and passes according to the owner’s estate plan or, if there is no controlling estate plan, under Texas intestacy law.
That can be exactly what the owners intend. A brother and sister who purchase investment property together may each want their respective share eventually to pass to their own children rather than to the surviving sibling. Tenancy in common allows each owner to control the disposition of that interest independently.
The same feature can create problems when it happens without sufficient planning.
Imagine a ranch owned equally by three siblings. When the first sibling dies, that sibling’s one-third interest passes equally to three children. The ranch now has five owners. Years later, another sibling dies and leaves that share among four children. What began as property owned by three people can become property owned by eight or nine, with each person holding a different fractional interest.
The property did not become more valuable or easier to manage because the ownership expanded; it simply acquired more decision-makers.
Those owners may also have very different relationships with the property. One may live on the land, another may operate the family business located there, while others may live across the country and view their interests primarily as investments. Some may want to preserve the property, while another may need liquidity and prefer to sell.
Texas law provides mechanisms for resolving these disagreements, including partition. Texas Property Code also provides additional procedures when qualifying real property is “heirs’ property,” including rules governing appraisal, cotenant buyouts, partition in kind, and, when necessary, sale of the property. Those protections can make the process more orderly, but reaching a court-supervised partition means the family’s ownership structure has already reached a point where judicial intervention may be necessary.
This is why tenancy in common should be considered as part of the estate plan rather than simply as a description on a deed.
If multiple people are going to own significant property together, their planning should consider what happens not only while all of the original owners are alive, but after the first and second generations of transfers. Each owner’s estate plan should address where the interest will go, while the owners collectively should consider how decisions about the property will be made as circumstances change.
Sometimes direct tenancy-in-common ownership remains appropriate. In other situations, an LLC, trust, buy-sell arrangement, or another structure may provide better rules for management, transfers, succession, and disagreements. A family that wants a ranch to remain intact across generations, for example, may be better served by passing interests in an entity that owns the ranch rather than continually dividing direct ownership of the land itself.
The distinction also matters when owners actually want the survivor to receive the property. Texas law recognizes survivorship arrangements, but survivorship should be affirmatively established rather than assumed merely because property is jointly owned. Texas law makes that point particularly clear in the context of joint financial accounts, where survivorship cannot be inferred merely from joint ownership or labels such as “JT TEN.”
Tenancy in common is not inherently a problem. In many circumstances, it provides exactly the independence that co-owners want. Each person has an ownership interest that can become part of that person’s own estate plan rather than automatically passing to the other owners.
The difficulty comes when the ownership structure is allowed to evolve without a plan for what happens next. Property that was easy for two or three people to own together can become remarkably difficult for eight, twelve, or twenty descendants to manage.
Shared property needs a succession plan just as much as the people who own it.
