Pros and cons of joint-tenancy home ownership

“How would you like to take title to your new home, Mr.and Mrs. Buyer?” the attorney or title closing settlement officer asks.

Thinking fast, you wisely ask, “Well, how do mostmarried couples take title?”

Purchase Bob Bruss reports online.

The reply is usually something like: “Most couples taketitle in joint tenancy.”

Not wanting to appear stupid or uninformed, you reply,”That’s fine with us.” But do you fully understand the pros and consof holding joint-tenancy title?

THE PRIMARY JOINT-TENANCY ADVANTAGES. To belegally correct, joint-tenancy real estate ownership means “joint tenancywith right of survivorship.” A few states require use of those exact wordson the deed. But in most states, “joint tenancy” is sufficient.

Survivorship means the joint tenant who outlives the jointtenant co-owner(s) automatically receives the deceased’s share of the propertywithout probate court costs or delays. Probate court avoidance is consideredthe major joint-tenancy advantage.

All that is usually necessary to clear the title of adeceased joint tenant’s name is to record a certified copy of the deathcertificate and an affidavit of survivorship with the local recorder of deeds.

The will of a deceased joint tenant has no effect on theirjoint-tenancy property. However, joint tenants still need a written will. Inthe event of simultaneous death of all the joint tenants, such as in a planecrash, the will of each deceased joint tenant determines who receives theirshare of the property.

Or, in the unlikely event one joint tenant kills anotherjoint tenant, the wrongdoer cannot receive the deceased joint tenant’s share bysurvivorship so the deceased joint tenant’s will then becomes important.

Although joint tenancy usually involves two co-owners, suchas husband and wife, there can be an unlimited number of joint tenants. Butthey all must take title at the same time by the same deed, and they all ownequal shares.

For example, suppose John and Mary Buyer purchase their homeas joint tenants. Each therefore owns a 50 percent share. However, when theirdaughter, Suzy, becomes 18 they decide to add her as an additional jointtenant.

To add Suzy to the title, John and Mary sign and record aquitclaim deed from themselves to John, Mary and Suzy as joint tenants withright of survivorship. The result is each of the three joint tenants now own aone-third interest in the home.

TENANCY BY THE ENTIRETIES FOR MARRIED COUPLES. In 24states, a husband and wife can hold title as tenants by the entireties, whichis very similar to joint tenancy. However, neither spouse can convey theirtenancy by entirety share without the other spouse’s signature.

This ownership form overcomes the joint-tenancy disadvantagethat one joint tenant can transfer his/her share without approval of the otherjoint tenant(s), thus breaking up the joint tenancy and creating a tenancy incommon.

Tenancy by the entireties for husband and wife is allowed inAlaska, Arkansas, Delaware, Florida, Hawaii, Indiana, Kentucky, Maryland,Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, NorthCarolina, Ohio, Oklahoma, Oregon, Pennsylvania, Tennessee, Vermont, Virginia,Wyoming, and the District of Columbia.

SEVEN PROS AND CONS OF JOINT TENANCY. Beforeconsulting your attorney or other trusted adviser to determine if joint tenancywith right of survivorship (JTWRS) is right for your situation, it pays to knowthe pros and cons:

1. A JOINT TENANT’S WILL DOES NOT AFFECT JTWRS PROPERTY. Exceptfor joint-tenancy simultaneous death or murder situations, a written will hasno effect on JTWRS property. Especially in second marriages, where each spouseoften wants to leave their half of the property to children of their firstmarriage, better alternatives might be holding title in a revocable livingtrust or as tenants in common.

2. PROBATE COSTS AND DELAYS ARE AVOIDED. When ajoint tenant dies, his or her share automatically passes to the surviving jointtenant(s) without probate court interference. This is considered the majorjoint-tenancy advantage.

3. JOINT TENANT’S SHARE CAN BE ATTACHED BY JUDGMENTCREDITORS. Unknown to most joint tenants, judgment creditors of onejoint tenant can attach that person’s share of the property. Or, if a jointtenant files bankruptcy and there is sufficient equity in the property, thebankruptcy court can order the property sold with the proceeds divided amongthe co-owners.

However, after a joint tenant dies, creditors cannot attachthe deceased’s share, which automatically passed to the surviving jointtenants.

4. IN A PARTITION LAWSUIT, ONE JOINT TENANT CAN FORCE A SALEOF THE PROPERTY. In most states, one joint tenant co-owner can bringa partition lawsuit to force a sale of the property. The same result applies totenants in common.

5. ALL JOINT TENANTS CAN OCCUPY AND MANAGE THE PROPERTY. Althougheach joint tenant has the right to occupy and manage the property, this canbecome a problem if one joint tenant refuses to pay his or her share of theproperty expenses.

However, if one joint tenant pays all the expenses, there isa right of reimbursement for necessary costs, such as property taxes.

If a joint tenant is under 18, a minor cannot convey titleor pay their share of the property expenses unless represented by acourt-appointed guardian. For this reason, minors should usually not be addedto the title as joint tenants.

Similarly, if a joint tenant becomes incapacitated, such aswith Alzheimer’s disease or a severe stroke, a court-appointed conservatormight be necessary to represent the incapacitated joint tenant. However, thisproblem can be avoided if title is held in a revocable living trust instead ofjoint tenancy.

6. APPROVAL OF CO-OWNERS IS NOT NEEDED TO BREAK UP A JOINTTENANCY. Except for tenancy by the entireties between husband andwife, one joint tenant can secretly convey his/her share to a third party, thusbreaking up the joint tenancy and creating a tenancy in common.

The most famous court decision on this issue is the 1980decision in Riddle v. Harmon (162 Cal.Rptr. 530). Shortly before herdeath, the wife secretly conveyed by a quitclaim deed her joint-tenancy shareto herself as a tenant in common. After her death, the surviving husbandpresumed he owned the entire property as the surviving joint tenant. But thecourt ruled the late wife’s secret deed to herself as a tenant in common madeher half of the property subject to her will, which left her assets to a thirdparty. The widower husband retained his 50 percent share as a tenant in common.

7. NON-SIMULTANEOUS DEATH OF JOINT TENANTS CREATESUNINTENDED RESULTS. When all joint tenants die at the same time and theorder of death cannot be determined, such as in a plane crash, the share ofeach deceased joint tenant then passes according to his/her written will (or bythe state law of intestate succession if no will is found).

However, if one joint tenant survives the other for just ashort time, his or her heirs receive the entire property. That happened a fewyears ago in Berkeley, Calif. Joint-tenant property owners Larry and hisgirlfriend Lana were on an evening walk. A drive-by shooter’s bullets hit bothLarry and Lana.

They were rushed to a nearby hospital where Lana died at2:58 a.m. Larry was kept alive on a ventilator until 4:55 a.m. when he died.Because Larry survived Lana, he was the surviving joint tenant of theirproperties. His heirs inherited all the joint-tenancy property under his willand Lana’s relatives received nothing because she was not the surviving jointtenant.

CONCLUSION: Although holding title as jointtenants (or tenancy by the entireties between husband and wife where allowed)offers many benefits, it also provides possible disadvantages. Otherco-ownership alternatives to be considered include tenants in common andrevocable living trusts. Consultation with your attorney and tax adviser isrecommended.

(For more information on Bob Bruss publications, visit his
Real Estate Center

Copyright 2006 Inman News

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