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Introduction: Essential Facts on Tenancy-in-Common (TIC) Interests
Real property may be held under various ownership arrangements in the State of Maryland. One type of ownership arrangement is known as “tenancy-in-common,” commonly abbreviated as TIC. Tenancy-in-common allows for multiple individuals or entities to co-own and hold a given piece of real property; TICs have their own set of rules and requirements which distinguish them from other ownership arrangements which involve multiple owners, such as joint tenancy.
In a tenancy-in-common, each owner possesses an “undivided interest,” in the property, which means that each owner is not necessarily limited to a particular part of the property; it also means that each individual ownership interest may be freely sold or transferred without disrupting or changing the overall ownership structure. Ownership interests in a TIC may be uneven, so one co-owner may have a larger share than other co-owners. In a TIC, there is no right of survivorship, and so when a co-owner passes his or her interests become part of his or her estate.
Tenancy-in-Common Interests May Be Transferred via Will
In the context of estate planning, TICs are significant for multiple reasons. For one, ownership interests in a TIC may be included in a will and distributed to beneficiaries; in this sense, a TIC interest should be regarded as a legitimate type of “real property,” something which is basically whole by itself despite being a percentage or share of something larger. TIC fractional interests have their own legal description, and should be conceived as discrete instruments. TIC interests may therefore be preferred as instruments which can be safely distributed to beneficiaries via last will and testament. TIC interests can be shared among multiple owners, and so a TIC interest initially owned by a single person can be distributed to more than one beneficiary.
As an asset, a fractional TIC interest may be quite valuable from an investment standpoint. TICs are commonly utilized to hold revenue generating properties, such as rental houses or apartment complexes, as well as other real property which has substantial upside potential.
Tenancy-in-Common Interests May Be Involved in a 1031 Exchange
The status of TIC ownership interests as real property is reflected in the fact that these interests are eligible for use in 1031 exchanges. In a 1031 exchange, the taxpayer acquires a new investment or business property to replace an existing one; a TIC interest may be used in an exchange, so a Marylander could theoretically sell a fractional TIC interest in a rental house and acquire a full fee simple interest in a piece of commercial real estate, as an example. This makes TIC interests useful from a financial point of view, as TIC co-owners may be able to exploit advantageous real estate market trends via 1031 exchange. This can translate into substantial wealth creation, if conducted wisely and with expert guidance. As an estate planning strategy, TICs may be exceptional as tools to maximize an estate’s value.
There is plenty more to cover when it comes to tenancy-in-common, and other ownership structures involving multiple owners. We will return to TICs in the future. For now, readers need to know that this arrangement is often very useful for various reasons, and enables convenient co-ownership of commercial properties.
Contact the Murphy Law Firm for More Information
If you would like to know more about tenancy-in-common interests, TICs in the context of estate planning, or another related matter, contact one of the estate planning attorneys at the Murphy Law Firm today by calling 240-219-5243.
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