Nationwide Mortgage Licensing System (NMLS) Practice Exam

Which type of co-ownership permits the property to pass to an heir?

1. Collaboration

2. Tenants in common

3. Joint tenancy

4. Subordination

The correct answer is: Tenants in common

The type of co-ownership that allows for property to pass to an heir is tenants in common. In this arrangement, each co-owner holds an individual, undivided interest in the property. This means that when one of the co-owners dies, their share of the property will not automatically transfer to the other co-owners, as is the case in joint tenancy. Instead, the deceased co-owner's share will be passed down according to their will or the state laws of intestacy if they did not leave a will. This characteristic makes tenants in common distinct, as it allows for the transfer of ownership rights to heirs or beneficiaries, providing flexibility in estate planning. In contrast, joint tenancy restricts the transfer of property upon death, as it comes with the right of survivorship, enabling the surviving co-owners to inherit the deceased's share automatically. Thus, understanding the implications of each type of co-ownership is crucial, especially when planning for the future transfer of property.