Is Joint Tenancy Your Best Title Option?
Joint Tenancy vs. Tenants in Common Comparisons
Joint tenancy is such a popular option for so many first-time home buyers that it's often the default option chosen by buyers without an explanation or any thought to the other options available. In fact, some purchase contracts contain a provision for choosing the way a buyer will hold title, although it's not common practice in states such as California.
Choosing joint tenancy as a method of holding title on property deeds is typically selected in escrow or at closing without a lot of explanation. That's because escrow officers, along with real estate agents and other professionals without a law degree, cannot practice law. Only a real estate lawyer can advise a client about real estate law in many states, as it probably should be. You don't want to get bad advice. And if you do, you want to have a person who is legally responsible to you for the bad advice.
How Joint Tenancy Works
Joint tenancy can be held by two or more people. Each person owns an equal share. However, Joint Tenancy with the Right of Survivorship also includes special transfers that allow for the title to pass to the remaining joint tenants after the death of a joint tenant. In this instance, an affidavit of death is typically recorded in the public records, along with a copy of the joint tenant's death certificate. The combination of those two items is enough to allow the remaining joint tenants to sell the home.
There are four unities that must exist in order for a joint tenancy to be created. The unities comprise what's referenced in legal circles as TTIP:
- Time: Each person must receive or obtain title to the property at the same time.
- Title: The deed needs to reflect the name of each person on the same document.
- Interest: Each person owns an equal portion of ownership.
- Possession: Each person possesses the same right to occupy the property.
If any of those four requirements do not exist, it is possible that the joint tenancy you may have believed was created could be challenged or contested and might not result in a final determination of joint tenancy.
Death of a Joint Tenant
A possible consequence of Joint Tenancy with Right of Survivorship is if a joint tenant dies, that joint tenant cannot bequeath the property to an heir, other surviving relatives or to anybody else. For example, if a sister and brother hold title as Joint Tenants with Right of Survivorship and the sister marries, the sister's husband cannot receive title to the property upon her death, even if her brother does not live in the home.
You might say, hey, wait a minute. If the sister and her husband live in the home, and the state is a community property state, isn't the sister's husband entitled to some kind of interest, perhaps through co-mingled funds? That's for lawyers to discuss, but the likelihood is the Joint Tenancy will allow the home to pass 100% to the brother, and, hopefully, the brother is kind enough to let his brother-in-law stay for a while.
If you didn't want that to happen, then perhaps Tenants in Common would have been another way to hold title that might have worked out as a better option in this arrangement. With Tenants in Common, there is only one unity that is shared, and that unity is the right of possession. Tenants in common individuals can hold equal or unequal shares and interests can be acquired at different times.
Joint Tenancy Vs. Tenants in Common
One of the main differences between Joint Tenancy with Right of Survivorship and Tenants in Common is how the title is transferred after death, and the rights of heirs. If the brother, his sister and the sister's husband all held title as Tenants in Common, the brother could not ask his brother-in-law to leave the property, if the sister dies. The brother-in-law can't demand that the brother move out, either. They each have an equal right to possession. Also, the sister's interest would pass to her heir, which could be her husband if she had so specified.
Under Community Property, generally, the title will be subject to probate or pass to an heir upon the death of one or more parties, depending on your state laws. However, Community Property can also include the Right of Survivorship, in which case, title will not transfer to heirs. Let's not even talk about taxation.
You can see why this issue of ways to hold title can become very complicated for a home buyer at the time of purchase. Some buyers don't want to deal with it because they are too excited about closing the home. But you should speak with a real estate lawyer and carefully consider each of the ways to hold title, discuss the pros and cons of each before you automatically pick Joint Tenants. Because Joint Tenancy might not be the right solution for you.
At the time of writing, Elizabeth Weintraub, BRE # 00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.