How Co-op Shareholders' Ownership Status Affects Survivorship Rights

Co-op shareholders don’t own their apartments but instead have a shareholding in the corporation. It’s essential for them to understand how shares are titled on the stock certificate, because different forms of ownership carry distinct implications regarding survivorship rights. When co-op ownership changes occur, being proactive about the necessary legal requirements is important because complexities can arise due to death or divorce or other life events. And in many cases, careful estate planning can streamline the share transfer process. 

Stock certificates. There are multiple ways to hold shares in a co-op. A couple can hold them as what’s called tenants in common. In this situation, both individuals own a 50% interest in the co-op separate and apart from each other. Another option is to hold the shares as joint tenants, meaning the shares are owned by both parties; if somebody passes away, the other person inherits automatically. Shares can also be held as what’s called tenants by the entirety. This provides survivorship rights for a married couple. So if one shareholder passes away, their shareholding automatically passes equally to the survivor. 

Right of survivorship. In 1996, there was a change in the law, whereby a married couple who took title of an apartment no longer needed to have any special notation on the stock certificate in order for their stocks to be presumed to have a right of survivorship. This simplifies the probate when a shareholder dies because survivorship is presumed. However, if a couple purchased shares before 1996, the shares will be held as tenants in common, with both individuals owning a 50% interest in the co-op. It’s not unusual to see an old stock certificate from prior to 1996 with two spouses' names but no indication they were married when they took title. 

If something were to happen to one of them, an estate proceeding would be needed in order to transfer shares to the surviving spouse. A surviving spouse who wants to sell may find the shares can’t be transferred and they may need to go to surrogate court in order to become appointed as a representative of the deceased spouse's estate. This is expensive and time-consuming. A proactive solution for a couple is to approach the co-op and ask to change how ownership is written. There may be some fees involved, but it makes sense to have that stock replaced with a new stock, or agree to make the notations on the certificate clear that when one shareholder dies, the balance goes to the other spouse.

Divorce situations. If the stock is owned jointly and one partner moves out, the stock certificate does not simply revert to the shareholder who stays. As part of a divorce proceeding, the couple will need to square away ownership of that title interest. Most married couples take title as tenants by the entirety but in the event of divorce, they become tenants in common, each owning half. 

Essential estate planning. If a child and parent are on the stock certificate, unless it says that those shares are jointly held, there is no presumption of survivorship so the parent would own half the shares and the child would own the other half. If the parent dies, the child would have to have the parent's estate probated. If the child has multiple siblings, that could complicate the child taking ownership of the apartment. In this situation, it might make sense for the child and parent to say right on the stock certificate that the shares are held with right of survivorship.