Types of Property Ownership in Illinois
Understanding How You Hold Title and What It Means for Estate Planning
Understanding Property Ownership in Illinois
The way you hold title to real estate in Illinois has profound implications for estate planning, probate, creditor protection, and tax planning. Illinois law recognizes several distinct forms of property ownership, each with unique characteristics that determine how property can be transferred, who has rights to it, and what happens when an owner dies.
Under Illinois property law (primarily codified in 765 ILCS), the form of ownership is established by the language used in the deed when the property is acquired. Understanding these ownership types is essential for making informed decisions about property transfers, estate planning, and asset protection.
Why This Matters: The way property is titled determines whether it goes through probate, who inherits it, whether creditors can reach it, and how it is taxed. Choosing the right form of ownership is one of the most important estate planning decisions you will make.
The Main Types of Property Ownership
Illinois recognizes the following primary forms of property ownership:
- Sole Ownership: One person owns the entire property
- Joint Tenancy with Right of Survivorship: Two or more people own equal shares with automatic inheritance
- Tenancy in Common: Two or more people own shares that pass through their estates
- Tenancy by the Entirety: Married couples own property with special protections
- Trust Ownership: Property held by a trustee for beneficiaries
- Life Estate: Current owner retains lifetime rights, with future ownership designated
Sole Ownership (Tenancy in Severalty)
Sole ownership, also called tenancy in severalty, means one person or entity owns the entire property outright. This is the simplest form of ownership and the default when a single person acquires property.
Characteristics of Sole Ownership
- Complete Control: The owner has absolute authority to sell, mortgage, lease, or gift the property without anyone else's consent
- Full Liability: The owner is solely responsible for all debts, taxes, and liabilities associated with the property
- Probate Required: When the sole owner dies, the property must go through Illinois probate unless other arrangements have been made
- Creditor Exposure: The owner's creditors can place liens on or force sale of the property to satisfy debts
Estate Planning with Sole Ownership
Sole owners have maximum flexibility for estate planning. Common strategies include:
- Naming beneficiaries through a will (property goes through probate)
- Creating a Transfer on Death Instrument (TODI) to avoid probate
- Establishing a life estate to designate future owners
- Transferring property to a revocable living trust
- Adding joint owners (though this has significant implications)
Probate Consideration: Without planning, solely-owned property will go through Illinois probate when you die, which can take 6-18 months and cost thousands of dollars in court fees and attorney costs.
Joint Tenancy with Right of Survivorship
Joint tenancy with right of survivorship is a form of co-ownership where two or more people own equal, undivided interests in property with the automatic right to inherit when a co-owner dies. This is one of the most common forms of ownership for married couples and family members in Illinois.
Key Features of Joint Tenancy
- Four Unities Required: Illinois law requires unity of time, title, interest, and possession
- Equal Ownership: Each joint tenant owns an equal share regardless of contribution
- Right of Survivorship: When one owner dies, their share automatically transfers to surviving joint tenants
- Probate Avoidance: Property passes outside of probate directly to surviving owners
- Severance: Any joint tenant can break the joint tenancy by transferring their interest
Creating Joint Tenancy in Illinois
Under Illinois law (765 ILCS 1005/1c), joint tenancy must be explicitly created. The deed must contain clear language such as "to [names], as joint tenants with right of survivorship, and not as tenants in common." Without this specific language, Illinois law presumes tenancy in common.
Advantages of Joint Tenancy
- Automatic property transfer at death without probate
- Simple and inexpensive estate planning tool
- Immediate access to property for surviving owners
- May provide some creditor protection (discussed below)
Disadvantages and Risks
- Loss of Control: Cannot sell or mortgage without all owners' consent
- Creditor Exposure: Co-owners' creditors may be able to attach liens to the property
- Unintended Consequences: Surviving owners may not be who you ultimately want to inherit
- Gift Tax Issues: Adding joint owners can trigger gift tax reporting requirements
- Medicaid Complications: May affect eligibility for long-term care benefits
- No Flexibility: Cannot direct where property goes after last joint tenant dies
Common Scenario: A parent adds an adult child as joint tenant on their home to avoid probate. This seems simple, but it exposes the home to the child's creditors, divorce proceedings, and may trigger gift tax consequences. Often, a TODI or trust is a better solution.
Tenancy in Common
Tenancy in common is the default form of co-ownership in Illinois when two or more people own property together. Unlike joint tenancy, tenancy in common does not include a right of survivorship.
Characteristics of Tenancy in Common
- Separate Shares: Each owner has a distinct, divisible share of the property
- Unequal Ownership: Owners can hold different percentages (e.g., 60%-40%, 33%-33%-34%)
- No Survivorship Rights: When an owner dies, their share passes through their estate, not to co-owners
- Independent Transfer: Each owner can sell, gift, or will their share without consent of other owners
- Partition Rights: Any owner can force a sale or division of the property through a partition lawsuit under 735 ILCS 5/17-101
How Tenancy in Common Works
In Illinois, tenancy in common is the presumed form of ownership unless the deed explicitly creates joint tenancy. If a deed transfers property "to John Smith and Mary Jones" without additional language, they are tenants in common, each owning a 50% undivided interest.
Estate Planning Implications
Tenancy in common offers more flexibility than joint tenancy for estate planning:
- Each owner can designate different beneficiaries in their will
- Owners can create different estate plans for their share
- Shares can be placed in trusts or subject to life estates
- Each owner's share goes through probate unless other arrangements are made
When to Use Tenancy in Common
Tenancy in common is appropriate when:
- Co-owners contribute unequal amounts to the purchase
- Owners want to leave their share to different beneficiaries
- Business partners or investors own property together
- Owners want to maintain independent control over their share
- Family members want to maintain flexibility in estate planning
Tenancy by the Entirety
Tenancy by the entirety is a special form of ownership available only to married couples in Illinois. It provides unique creditor protections and ownership rights beyond those available through joint tenancy.
Key Features
- Married Couples Only: Only legally married spouses can hold property as tenants by the entirety
- Right of Survivorship: Property automatically passes to the surviving spouse at death
- Joint Management: Both spouses must consent to any sale, mortgage, or transfer
- Creditor Protection: Individual creditors of one spouse generally cannot attach liens or force sale of entirety property
- Automatic Creation: In Illinois, when married couples acquire property, tenancy by the entirety may be presumed
Illinois Law on Tenancy by the Entirety
Under Illinois law (750 ILCS 65/), property acquired by married couples during marriage may be held as tenancy by the entirety. While Illinois does not require specific language to create this form of ownership, clear documentation is recommended to ensure the intended form of ownership is established.
Creditor Protection Benefits
The most significant advantage of tenancy by the entirety is creditor protection. Under Illinois law:
- Creditors of only one spouse cannot force sale of entirety property
- Individual judgments do not attach to entirety property
- Only joint creditors (debts owed by both spouses) can reach entirety property
- This protection continues until divorce, death, or voluntary conversion to another form of ownership
What Happens at Death or Divorce
Tenancy by the entirety terminates in two situations:
- Death: Property passes automatically to the surviving spouse without probate
- Divorce: The tenancy by the entirety converts to tenancy in common, with each former spouse owning a 50% interest
Tenancy by the Entirety Checklist
- Only available to married couples
- Provides strong creditor protection
- Requires consent of both spouses for any transfer
- Automatically passes to surviving spouse
- Avoids probate at first spouse's death
- Converts to tenancy in common upon divorce
Trust Ownership
Property can be owned by a trust, with a trustee holding legal title for the benefit of trust beneficiaries. This is one of the most flexible and powerful forms of ownership for estate planning purposes.
How Trust Ownership Works
When property is held in trust:
- The trustee holds legal title to the property
- Beneficiaries have equitable (beneficial) ownership rights
- The trust document governs how property is managed and distributed
- Property avoids probate when the grantor dies
Revocable Living Trusts
The most common trust for Illinois estate planning is the revocable living trust. Key features include:
- Grantor typically serves as trustee during lifetime
- Complete control and flexibility retained
- Can be amended or revoked at any time
- Avoids probate at death
- Provides incapacity planning
- Maintains privacy (trust terms are not public record)
Advantages of Trust Ownership
- Complete probate avoidance for all trust assets
- Centralized management of multiple properties and assets
- Detailed distribution instructions
- Management provisions if you become incapacitated
- Privacy protection
- Creditor protection for beneficiaries (in some trust types)
- Flexibility to handle complex family situations
Transferring Property to a Trust
To hold property in trust, you must execute and record a deed transferring the property from your individual name to the trust. The deed should reference the trust name and date. For example: "John Smith, as Trustee of the John Smith Revocable Living Trust dated January 1, 2024."
Comparison of Ownership Types
| Ownership Type | Probate Avoidance | Control | Creditor Protection | Best For |
|---|---|---|---|---|
| Sole Ownership | No | Complete | None | Single owners wanting flexibility |
| Joint Tenancy | Yes | Shared | Limited | Spouses, simple estate planning |
| Tenancy in Common | No | Independent for each share | None | Unequal ownership, business partners |
| Tenancy by Entirety | Yes | Joint (both spouses) | Strong | Married couples seeking protection |
| Trust Ownership | Yes | Per trust terms | Varies | Comprehensive estate planning |
| Life Estate | Yes | Limited | Limited | Medicaid planning, simple transfers |
Frequently Asked Questions
Can I change the way my property is titled?
Yes. You can change property ownership by executing and recording a new deed. However, some changes may have significant tax, legal, and estate planning consequences. For example, adding someone as a joint owner may trigger gift tax reporting, affect Medicaid eligibility, or expose the property to their creditors. Always consult with an estate planning attorney before changing how property is titled.
How do I know how my property is currently titled?
Your current deed shows how you hold title. You can find your most recent deed in your closing documents, or obtain a copy from the recorder's office in the county where the property is located. Look for the language in the granting clause that describes how the grantees take title. Common phrases include "as joint tenants," "as tenants in common," "as tenants by the entirety," or simply the name of a sole owner.
What is the best form of ownership for estate planning?
There is no single "best" form of ownership. The right choice depends on your specific circumstances, including your marital status, family situation, creditor concerns, estate planning goals, and asset protection needs. For married couples, tenancy by the entirety offers strong protections. For comprehensive estate planning, trust ownership provides maximum flexibility. For simple situations, a Transfer on Death Instrument with sole ownership may be ideal. Consult an attorney to determine the best approach for your situation.
Does joint tenancy protect property from creditors?
Joint tenancy provides limited creditor protection in Illinois. Under Illinois law, a creditor of one joint tenant can force a partition sale to reach that tenant's interest in the property. However, they cannot force sale to satisfy a debt that exceeds the debtor's proportionate share. Tenancy by the entirety (for married couples) offers much stronger creditor protection, as individual creditors generally cannot reach entirety property.
What happens to joint tenancy property if one owner becomes incapacitated?
If one joint tenant becomes incapacitated, the other joint tenants cannot sell or mortgage the property without consent from the incapacitated owner's court-appointed guardian. This can create significant problems and expense. This is one reason why trust ownership is often preferable to joint tenancy, as the trust document can provide for management during incapacity without court involvement.
Need Help Choosing the Right Property Ownership Structure?
Our experienced Illinois estate planning attorneys can review how your property is currently titled, explain your options, and help you choose the ownership structure that best achieves your estate planning goals.
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