Often times when two unmarried people buy real estate together their attorney will recommend that they hold title “jointly.” This means that they will both show up in the county records as “owner of record” and the entire world will know that they are the big bad owners of the property in question.
By now you know that I do not recommend that people hold title to their real estate in their own name or jointly (I recommend the Illinois Type Land Trust as title holder).
One of the many reasons to use a Land Trust is to avoid the Right of Partition that joint title holders have. In other words, if a joint title holder (two or more persons or entities) share ownership of real estate, any one of the owners can at any time demand partition; i.e. to sell the real estate and divide the proceeds. Or, worse yet, the creditors of just one of the owners can demand partition and adversely affect the other owners.
Real estate that is held in a Land Trust cannot be partitioned. The beneficiaries do not have the right of partition (nor do the beneficiary's creditors). However, unless restricted in the beneficiaries’ agreement, a beneficiary could sell his/her/its beneficial interest to another party without authorization from the other beneficiaries.
Consequently, I do not advise being a joint beneficiary either. There have been court cases that have deemed co-beneficiaries as “general partners.” This means that one co-beneficiary could be liable for the actions of another co-beneficiary.
You do NOT want to be a general partner, co-beneficiary or partner with anyone else on the planet! This does not mean that you cannot do business with others. It just means that you have to learn how to structure your ownership correctly using a Land Trust, Personal Property Trusts and other types of entities.
Next time I will talk about creative ways of doing real estate deals.
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