Before consulting your attorney or other trusted adviser to determine if joint tenancy with right of survivorship (JTWRS) is right for your situation, it pays to know the pros and cons:
- A JOINT TENANT’S WILL DOES NOT AFFECT JTWRS PROPERTY. Except for joint-tenancy simultaneous death or murder situations, a written will has no effect on JTWRS property. Especially in second marriages, where each spouse often wants to leave their half of the property to children of their first marriage, better alternatives might be holding title in a revocable living trust or as tenants in common.
- PROBATE COSTS AND DELAYS ARE AVOIDED. When a joint tenant dies, his or her share automatically passes to the surviving joint tenant(s) without probate court interference. This is considered the major joint-tenancy advantage.
- JOINT TENANT’S SHARE CAN BE ATTACHED BY JUDGMENT CREDITORS. Unknown to most joint tenants, judgment creditors of one joint tenant can attach that person’s share of the property. Or, if a joint tenant files bankruptcy and there is sufficient equity in the property, the bankruptcy court can order the property sold with the proceeds divided among the co-owners. However, after a joint tenant dies, creditors cannot attach the deceased’s share, which automatically passed to the surviving joint tenants.
- IN A PARTITION LAWSUIT, ONE JOINT TENANT CAN FORCE A SALE OF THE PROPERTY. In most states, one joint tenant co-owner can bring a partition lawsuit to force a sale of the property. The same result applies to tenants in common.
- ALL JOINT TENANTS CAN OCCUPY AND MANAGE THE PROPERTY . Although each joint tenant has the right to occupy and manage the property, this can become a problem if one joint tenant refuses to pay his or her share of the property expenses. However, if one joint tenant pays all the expenses, there is a right of reimbursement for necessary costs, such as property taxes. If a joint tenant is under 18, a minor cannot convey title or pay their share of the property expenses unless represented by a court-appointed guardian. For this reason, minors should usually not be added to the title as joint tenants. Similarly, if a joint tenant becomes incapacitated, such as with Alzheimer’s disease or a severe stroke, a court-appointed conservator might be necessary to represent the incapacitated joint tenant. However, this problem can be avoided if title is held in a revocable living trust instead of joint tenancy.
- APPROVAL OF CO-OWNERS IS NOT NEEDED TO BREAK UP A JOINT TENANCY. Except for tenancy by the entireties between husband and wife, one joint tenant can secretly convey his/her share to a third party, thus breaking up the joint tenancy and creating a tenancy in common. The most famous court decision on this issue is the 1980 decision in Riddle v. Harmon (162 Cal.Rptr. 530). Shortly before her death, the wife secretly conveyed by a quitclaim deed her joint-tenancy share to herself as a tenant in common. After her death, the surviving husband presumed he owned the entire property as the surviving joint tenant. But the court ruled the late wife’s secret deed to herself as a tenant in common made her half of the property subject to her will, which left her assets to a third party. The widower husband retained his 50 percent share as a tenant in common.
- NONSIMULTANEOUS DEATH OF JOINT TENANTS CREATES UNINTENDED RESULTS . When all joint tenants die at the same time and the order of death cannot be determined, such as in a plane crash, the share of each deceased joint tenant then passes according to his/her written will (or by the state law of interstate succession if no will is found). However, if one joint tenant survives the other for just a short time, his or her heirs receive the entire property. That happened a few years ago in Berkeley, California. Joint-tenant property owners Larry and his girlfriend Lana were on an evening walk. A drive-by shooter’s bullets hit both Larry and Lana.They were rushed to a nearby hospital where Lana died at 2:58 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 their properties. His heirs inherited all the joint-tenancy property under his will and Lana’s relatives received nothing because she was not the surviving joint tenant.
CONCLUSION: Although holding title as joint tenants (or tenancy by the entireties between husband and wife where allowed) offers many benefits, it also provides possible disadvantages. Other co-ownership alternatives to be considered include tenants in common and revocable living trusts. Please consult with your Attorney and Tax Adviser.