In which form of property ownership does each party own an undivided interest that passes to their heirs at death?

The form of property ownership where each party holds an undivided interest and that interest passes to their heirs at death is known as tenancy in common. In this arrangement, each co-owner has the right to possess and use the entire property, despite owning a fractional interest. This means that if one owner were to pass away, their share of the property does not automatically go to the other co-owners but instead is transferred according to their will or, if they died intestate, to their heirs. This feature differentiates tenancy in common from joint tenancy, where the right of survivorship means that the deceased owner’s share would automatically pass to the other owners, not their heirs.

This understanding of the structure of tenancy in common is crucial for individuals considering how they want their property to be managed and passed on after their death. It provides flexibility in estate planning since each owner's share can be bequeathed as they wish.