Hawaii Tenancy

The manner in which a person hold title in Hawaii will have important legal and tax ramifications. The buyer's determination of how title should be taken and held should be done so with the advice of legal counsel and/or an accountant. As tenancy to real property varies from state-to state depending on the local statues, the following has been prepared to assist in the selection of tenancy to real property in Hawaii.

1. Tenant in Severalty - Sole ownership. It simply means that it is owned by one person only and he or she alone can use, mortgage or dispose of the property. Corporations hold title to property as Tenant in Severalty. Property under this tenancy may be attached. Upon death or owner, the property is subject to probate.

2. Tenants in Common - A form of ownership among two or more persons regardless of relationship. Tenants in Common need not hold equal undivided interests (i.e., one tenant may hold a 3/4th undivided interest and the other tenant may hold a 1/4th undivided interest). Undivided interests must be specified in documents to be recorded.

Upon death of one of the co-tenants, his or her interest is subject to probate proceedings and passes to his or her heirs and not to the surviving co-tenants.

Married couples who acquired a tenant in common interest, may hold their undivided interest as Tenants by the Entirety or as Joint Tenants as to each couple (i.e., a married couple may hold a 1/2 undivided interest in real property as Tenants by the Entirety, between themselves, which interest is held in common with the other persons of the undivided interest).

3. Joint Tenants - A form of ownership among two or more persons regardless of relationship. Each tenant has an equal undivided interest in the property. The surviving joint tenant(s) hold title to the property free from the claims of the heirs and creditor of the deceased joint tenant. No probate proceedings are necessary to transfer title.

A joint tenant may not will his interest, but may sell his interest or portion of the property held by joint tenancy. Any tenant may unilaterally convey his or her fractional interest; however, this unilateral action automatically changes title of that fractional interest to tenancy in common. Property under this tenancy may be attached. Divorce does not effect tenancy.

Important Note: This information is for reference only. Please be sure to consult with a competent financial planner or estate attorney before making any decisions.

(view a good article on Tenancy from USA Today)

 

  Tenancy in Severalty Tenancy in Common Joint Tenancy Tenancy by Entireties
Definition Property held by one person, severed from all others. Property held by 2 or more persons, with no right of survivorship. Property held by 2 or more individuals (not corporation), with right of survivorship. Property held by husband and wife or reciprocal beneficiaries with right of survivorship.
Creation Any transfer to one person. By express act; also by failure to express the tenancy. Express intention plus 4 unities of time, title, interest and possession (with statutory exception). Express intention, only husband and wife or reciprocal beneficiaries. Divorce or dissolution of the reciprocal beneficiary relationship automatically results in tenancy in common.
Possession Total Equal right of possession. Equal right of possession. Equal right of possession.
Title One title in one person. Each co-owner has a separate legal title to his undivided interest: will be equal interests unless expressly made unequal. One title to the whole property since each tenant is theoretically deemed owner of the whole; must be equal undivided interests. One title in the marital unit.
Conveyance No restrictions (check release of marital rights if any) Each co-owner's interest may be conveyed separately by its owner; purchaser becomes tenant in common. Conveyance of 1 co-owner's interest breaks his tenancy; purchaser becomes tenant in common. Cannot convey without consent of spouse or other owner.
Effect of Death Entire property subject to probate & included in gross estate for federal & state death taxes Decedent's fractional interest subject to probate & included in gross estate for federal & state death taxes. The property passes by will to devisees or heirs, who take as tenants in common. No survivorship rights. No probate & can't be disposed of by will; property automatically belongs to surviving co-tenants (last one holds in severalty). Entire property included in decedent's gross estate for federal estate tax purposes, minus % attributable to survivor's contribution. Right of survivorship so no probate. Same death taxes as joint tenancy.
Creditor's Right Subject to creditor claims. Co-owner's fractional interest may be sold to satisfy his creditor who then becomes tenant in common. Joint tenant's interest also subject to execution sale, joint tenancy is broken & purchaser becomes tenant in common. Creditor gets nothing if debtor tenant dies before sale. Only a creditor of both spouses can execute on property.
Presumed by Law None. Favored in doubtful cases; presumed to be equal interests. Not favored so must be expressly stated. Must be expressly stated.