There are many ways to take title to real property when it is co-owned with another individual. Joint tenancy is the legal term for two or more people holding an asset with rights of survivorship upon death. When holding property in joint tenancy, each party’s asset share passes to the surviving party or parties upon a joint tenant’s death. Most commonly, assets held in joint tenancy include real estate, vehicles, bank accounts, and securities.
Typically, married couples or parents and children prefer to hold joint tenancies. Business partners or friends, on the other hand, usually do not choose this form of title.
Read on to learn more about the benefits and potential downsides of holding property in joint tenancy.
Holding Property in Joint Tenancy – Pros
Oftentimes, married couples take title as joint tenants by the entirety with the right of survivorship. This way, joint tenants are entitled to a share of any rents and profits from the property. Additionally, the surviving tenant can easily obtain property after an owner dies and avoid probate costs.
When a property owner dies, the estate may need to be probated. To initiate this process, the court will decide whether their will is valid and binding. Additionally, they will assess any liabilities and assets of the deceased. Then, once all debts are settled, the court distributes any remaining assets to the designated beneficiaries. However, if a person dies without a will, the probate process may be more complex and drawn out.
Luckily, holding property in joint tenancy avoids probate completely. When title to property is in joint tenancy and one of the owners dies, the surviving tenant easily obtains ownership, thus avoiding probate.
In order to transfer the assets, the surviving tenant must record a certified copy of the deceased’s death certificate to remove their name from title. Then, the court will record a new document with an attached certified copy of the death certificate to officially remove the decedent as an owner of the real property.
Holding Property in Joint Tenancy – Cons
Joint tenants each hold an undivided, 100% share of the asset. Therefore, a joint tenant may transfer their interest unilaterally without the knowledge or consent of the co-tenant. This equal share of responsibility may be disadvantageous to a joint tenant who cannot afford to pay for any liabilities associated with the asset.
When an owner dies, the surviving tenant must find another method to transfer the property to his or her beneficiaries upon death. Additionally, banks may freeze accounts held as joint tenants to prevent the surviving tenant from completely liquidating the account. Courts allow this in the event the deceased tenant has large sums of outstanding debts.
Finally, property held in joint tenancy passes to the surviving joint tenant regardless of the decedent’s legal heirs as directed by their will or trust. Therefore, holding property in joint tenancy may result in unintended estate planning consequences such as inadvertently disinheriting children or others.
Alternatives to Holding Property in Joint Tenancy
A common alternative to holding property in joint tenancy is tenancy-in-common. Holding property as tenants-in-common allows each owner to keep an identified percentage of ownership. A co-tenant can sell his or her share of the asset without the other tenant’s approval. Additionally, each co-tenant’s share will pass to the heirs indicated in their will. Finally, all assets must be readily accessible to all co-tenants at all times.
Interested in filing joint tenancy on your most important assets? Contact A People’s Choice for more information about holding property in joint tenancy. We can help you complete all the required paperwork to hold real or other property as joint tenants or explore alternatives if you’re on the fence. Call us today at 800-747-2780.