Thomas and his brother Michael purchase a vacation home in Lake Murray, South Carolina. Their deed reads: 'To Thomas and Michael as joint tenants with right of survivorship and not as tenants in common.' Two years later, Thomas files for bankruptcy. The bankruptcy trustee seeks to claim Thomas's interest in the property to pay his creditors. Which of the following is most accurate?
Correct Answer
D) The bankruptcy trustee can claim Thomas's undivided interest, which would sever the joint tenancy and create a tenancy in common with Michael
A joint tenant's interest in property is not exempt from creditor claims simply because it is held in joint tenancy. When Thomas files for bankruptcy, his undivided interest in the jointly held property becomes part of his bankruptcy estate. The bankruptcy trustee can claim Thomas's interest. However, when the trustee (as a third party) acquires Thomas's interest, this severs the joint tenancy — because the four unities are broken when a new party takes the interest through involuntary transfer. The result is that the trustee and Michael become tenants in common, not joint tenants, and Michael retains his undivided half interest. The right of survivorship is extinguished as to Thomas's former share.
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Related Topics & Key Terms
Key Terms:
Related Concepts
In a cooperative (co-op), the building is owned by a corporation, and residents purchase shares of stock in the corporation that entitle them to a proprietary lease on a specific unit. Residents are shareholders, not property owners.
Fee simple absolute is the highest and most complete form of property ownership, giving the owner unrestricted rights to use, possess, enjoy, and dispose of the property. It is of unlimited duration and fully inheritable.
Community property is a system where property acquired during a marriage is owned equally by both spouses.
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