There are several appealing factors of investing in real estate. For instance, the ability to potentially earn passive income makes real estate investing one way to generate wealth. In fact, around 90% of the world’s millionaires have real estate investments somewhere in their portfolios, largely because it allows them to seek passive income. Additionally, real estate investing can provide an opportunity for you to build generational wealth that can set your family up for financial success for generations.
It’s important to note that there are multiple ownership structures out there, some of which we believe lend themselves to building generational wealth better than others. Tenants-in-common (TIC), a real estate ownership structure that is conducive to multiple owners, is a popular choice among investors. Understanding what it is and whether you can name your children as owners under this structure can help you understand whether TIC properties have a place in your portfolio.
What Is a Tenants-in-Common Property?
A tenants-in-common property, also referred to as a TIC, is an ownership structure in which two or more people own the same piece of property. There are several ways that the ownership stake in the property can be divided up. For instance, if two people come together to purchase a $100,000 piece of land and they both put up $50,000, they will each own 50% of the property. However, if there are more than two owners, and those owners put in varying percentages of the purchase price, ownership can look much different. Ultimately, under a tenancy in common agreement, all of the owners have a share of the ownership that is proportionate to the amount of money that they have put in.
Can I Name My Children as Tenants-in-common?
One of the most important aspects of TIC properties is what happens to an owner’s share after he or she dies. Under joint tenancy, which is another ownership structure entirely, a deceased owner’s stake in the property is distributed among the other owners. With a TIC, a deceased owner’s stake in the property is distributed among whoever he or she names in his or her will.
As an owner in a TIC, you have the legal right to do anything you’d like to do with your share of the property. For example, if you have two children and want to gift them with investment property, you can simply give them some or all of your interest in the TIC property. If you own 50% of the property and decide that you want to give your two children an ownership stake, you can divide your 50% however you would like. This allows you to maintain an ownership stake while allowing your children to own a piece of the property as well. Additionally, you can distribute your ownership stake in the property as you wish in your will.
One of the reasons that many investors get into real estate is the fact that they want to create a better financial future for their children and other heirs. While several investment opportunities only allow you to benefit your children after you’re gone, TIC investments allow you to improve your children’s financial standing while you’re still alive to see it. It’s just one of many reasons to consider investing in TIC properties.
