Ever thought buying a home was out of your reach? Ever wanted to invest money somewhere, but would prefer to dip your foot into the pool to test the waters instead of diving in head first? If so, Joint Tenancy is a viable option for anyone looking to buy a home without taking the full plunge. What is Joint Tenancy, you ask? Simply stated, it is a form of ownership whereby two or more people share equally in property or assets. The individuals involved are referred to as Joint Tenants and all parties within a Joint Tenancy share equal rights to keep or dispose of property as they so choose.
Joint Tenancy was created as an equitable form of property transference between married couples, parents and their children, as well as business partners. If one half of the partnership dies, the remaining property is transferred to the surviving entity and this is referred to as Joint Tenants with the Right of Survivorship (JTWROS). Joint tenancies can be shared assets including real estate (personal or commercial), brokerage accounts, and bank accounts. Provisions must be made in any case of a joint tenancy agreement. For one, the joint tenants must own equal shares so that no one person has more than the other. Also, the estates of both tenants must be fixed and unalterable for life and lastly, the joint tenants hold the property under the same title 4. The joint tenants enjoy the same privileges until one person dies.
Joint Tenancy isn’t for everyone. Like most things in life, there are advantages and disadvantages to Joint Tenancy and it’s important to learn both sides of the coin before moving forward with Joint Tenancy. The primary advantage for small estates is the low cost. In general, the process is also quick and inexpensive with a simple application to fill out by a lawyer or qualified counsel and signed by all pertinent parties. The only person legally permitted to inherit any assets from the deceased party is the joint tenant.
Some of the disadvantages can be costly during tax time. Loss of estate protection is a major consideration as estate taxes can be as high as 50% of the value of the asset when transferred to the surviving party or parties within the agreement. There’s also a possibility for a gift tax consequence which can result from the transfer of joint tenancy.
Normally when a person passes away, his or her will is reviewed by what is known as probate court and it is the court’s responsibility to decide whether the will is valid and legally binding. The court must also decide if the assets and liabilities are still outstanding. During the probate process, the debits must be settled and distributed to the heirs of the will. If the individual dies without leaving a will, the distribution process complicates because burden is on the court to determine who will inherit the remaining assets. This process can take upwards of months if not years. On the other hand, with JWTROS, ownership is automatically transferred to the other spouse or business partner, this avoiding the lengthy process of probate. JTWROS also supersedes all provisions of a will or any trust previously established.
Tenancy In Common, a variation of Joint Tenancy, can be established by a will, deed or operation of law. In Tenancy in Common Agreements, a tenant can have an unequal share of the assets. Also, tenants are able to dispose of their shares anytime they wish. There is no Rights of Survivorship and upon death, the property goes to the deceased person’s heirs, not other tenants.
Married couples have the option, also, of Tenancy by the Entirety where the surviving spouse protects their assets from the deceased’s creditors. Neither party can dispose of his or her share without the other’s approval and upon divorce, the asset title converts to Tenant in Common.
Didn't find the answer you wanted? Ask one of your own.
Ask our community a question.
Searching Today's Rates...
Featured Lenders
Vision One Mortgage
Huntington Beach, CA
RBS Citizens
Clifton Park, NY
Whitman Met, Inc.
Sacramento, CA