Joint Tenants with Rights of Survivorship

It is very common for spouses to own property together as joint tenants with right of survivorship. When one passes, the other owns the property outright. It’s simple, easy, and automatic. But once in a blue moon when the other joint owner isn’t your spouse, it gets messy.

When you co-own an asset with another individual, you can still have an agreement known as “joint tenants with rights of survivorship.” Then if one of the owners passes away, the surviving owner automatically becomes sole owner of the property.

The messy part comes in when you have a will that says your half of a vacation cabin should be split between the kids. However, if the property is held jointly with a friend or a relative, contrary to your wishes, you will lose control of the property and the entire ownership goes to the joint tenant. The vacation cabin you bought with your brother for your kids to enjoy through their life is now your brother’s. Joint tenancy supersedes a will.

Some other points:

Your brother who owns the property as “joint tenants with rights of survivorship” has the ability to sell his interest in the cabin without your knowledge or approval.

  • It can be very challenging to remove a co-owner from the property title without full cooperation from him or her.
  • A danger of jointly held property is the exposure of the asset to the creditors’ claims of both owners. Suppose your brother, the joint tenant of the cabin gets into financial difficulties. His ownership in the cabin may be claimed by a creditor or forced to be sold to pay off debts.
  • By adding a non-spouse person to the title of an asset, you are making a gift to the new joint owner. Depending on the current value of the property being gifted, you may be liable for gift taxes.

The cons of holding joint title with a non-spouse many times outweigh the pros. Loss of control of the property, becoming subject to the co-owner’s creditors, and potentially higher taxes can be negative consequences. Because property ownership is so important to your overall financial planning, be sure to discuss these issues with a qualified advisor before taking action.

There is another way to own property jointly. That is as tenants in common. Joint tenancy and tenancy in common have different rules concerning the death of one of the tenants. In tenancy in common, death of one of the parties shall have the effect of transferring the rights of the decedent tenant in favor of his heirs. In other words, if the brother owned the cabin as tenants in common, the kids would inherit the father’s half. Contrast that with joint tenants with rights of survivorship. When one of the co-owners die, the survivor co-owner shall get the decedent’s share over the property.

Joint tenants with rights of survivorship works great with husband and wife, but not so great when ownership conflicts with your will.

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