Legal Forms of Asset Ownership

When you "own" property, you have the exclusive rights to possess and control the property, to use the property for pleasure or for profit, and to dispose of the property during your lifetime by contract, deed, grant, lease, or gift; or to dispose of it at death, by inheritance, bequest, or devise. You also have the responsibility for all expenses and other charges in connection with the property.

When one person owns the property, all of these rights and responsibilities are vested in that individual. When two or more persons own the property, there must be some method of allocating the rights and responsibilities between the various co-owners. The rules governing the rights and duties of property co-owners are determined by state laws and, therefore, are somewhat different in each state.

Most states have adopted the laws handed down from the old English common law system, and continue to use the old terminology, such as "tenant" meaning owner and "tenancy" meaning ownership. In addition, a few states, when dealing with property held jointly by a husband and wife, have borrowed from the civil law traditions of Spain and France and have adopted a system of "community property" or "marital property."

The law of the state in which the property is located usually prevails. For example, if a person who resides in Illinois owns a parcel of property located in Alabama, the law of Alabama will determine the ownership rights and the form and content of the various legal documents and procedures involved in the selling, leasing, financing, inheritance, bequest, or devise of the property.

There are four types of co-ownership:

• Tenancy in common is used when property is held by two or more persons and, upon death, each owner's interest passes to his heirs or devisees.
• Joint tenancy with right of survivorship is used when property is held by two or more persons and, upon death, each owner's interest automatically passes to the other co-owners.
• Tenancy by the entirety applies only to husband and wife during the marriage.
• Community property applies only to husband and wife who reside or own property in a state that has enacted the community/marital property laws.