Understanding Joint Ownership of Property

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There are three basic ways you can own property: in your name, in joint names with others, and through contract rights. Whether or not a particular asset you own at the time of your death will need to be probated will depend entirely upon how it's titled.

Joint ownership comes in three forms: with rights of survivorship, as community property, and as tenants in common. Sometimes people enter into a joint ownership agreement as a way to afford a property they could not otherwise buy, but it's important to understand that this has an impact on others and can complicate who gets the right to the property when one of the owners dies.

Let's look at the various forms of ownership and the implications of each.

Joint Tenancy With Rights of Survivorship

Joint tenants with rights of survivorship are frequently abbreviated on account statements as "JTWROS." JTWROS indicates that if there are two or more owners on the asset, and one owner dies, then the surviving owner or owners will continue to own the asset. In this type of ownership, the estate and heirs-at-law of the deceased owner will receive absolutely nothing. The surviving owners will need to remove the deceased owner's name from the asset. They may accomplish this by showing a death certificate as they record a new deed which will indicate that one of the joint tenants has died.

Tenancy By the Entirety

A special type of joint tenancy with rights of survivorship that is recognized between married couples in some states is called tenants by the entirety (TBE). Aside from avoiding probate, this type of ownership is important for asset protection planning in states where it is recognized. If one spouse dies, the property automatically passes in full to the surviving spouse. It is only valid if the couple remains married. Should divorce occur, the ownership changes to a tenancy in common.

Each partner in a TBE relationship is the only one allowed to own the property. This means that one of the married partners cannot pass their "share" to anyone outside the marriage. For this reason, people in second marriages with heirs from a previous marriage may choose a different form of ownership if they want to bequeath their share to a child.

Community Property

Community property is the third version of joint ownership. This ownership is recognized between married couples in nine states: Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In Alaska, married couples can elect to have some or all of their property treated as community property by stating so in a written contract.

What happens to community property when one spouse dies? It will depend on whether or not the couple made an estate plan.

If there isn't an estate plan, then the intestacy laws of their state will dictate where the community will go. If there is an estate plan, then the terms of the estate plan will supersede state law, and the community property will go exactly where the spouses want it to go.

Tenancy in Common

If two or more people own the property as tenants in common (TIC), then each owner will hold a percentage of interest in the property. The percentages owned do not have to be equal portions. Most often, this percentage of ownership is determined by how much each owner contributes to the purchase of the property.

For example, if a piece of real estate costs $100,000 and owner A contributes $70,000, and owner B contributes $30,000, then owner A will hold a 70% interest as a tenant in common, and owner B will hold a 30% interest as a tenant in common. In the event of the death of owner A, their 70% interest will pass to whoever was the stated beneficiary in their Last Will and Testament or Revocable Living Trust. Without a will, the heir at law will inherit the property.

Unless owner B is named in A's Last Will or Revocable Living Trust or is A's heir-at-law, they won't be entitled to receive any part of A's 70% interest. Furthermore, if A's 70% interest is titled in their name as a tenant in common and not in the name of their Revocable Living Trust at the time of their death, then A's 70% interest will need to be probated.