“Survival” Isn’t Guaranteed: Understanding Joint Tenancy and Rights of Survivorship

Posted Mar 25, 2020


Many legal set-ups are available when it comes to co-owning assets, whether those assets consist of real property, bonds, bank accounts, or even stamp collections. Determining the best vehicle for ownership, especially among many people or partners, depends on the relationship between the individuals, and what happens to the property if one of those individuals should die.

In the latter case, two or more partners might enter into a joint tenancy to buy or own property. Through a joint tenancy structure, a decedent’s share automatically goes to the remaining partner/partners, and a costly and time-consuming probate might be avoided. 

We say “might,” because without a specific designation known as “rights of survivorship,” surviving partners could be in for a surprise if, and when, they attempt to sell their property.

To ROS? Or not to ROS?

Joint tenancy with rights of survivorship — sometimes designated as JT WROS or JT ROS — is, as the designation suggests, a form of joint ownership of an asset. When a spouse or partner dies, the surviving partner/spouse receives the remaining interest of the asset in question. But rights of survivorship aren’t always automatic or implied, especially if not spelled out on a deed or certificate of ownership.

For example, if two partners own real property through a joint tenancy (without survivorship rights), each has a 50% interest in said property. If one of the partners dies, that 50% interest might not always pass on to the surviving partner. This presents a problem if the surviving partner attempts to sell or refinance the property. In some cases, the issue has to go to the courts for resolution. In other cases, the surviving owner(s) might have to file an affidavit of heirship to 1) prove ownership of the asset, and 2) prove the relationship to the decedent. In either case, it means legal expenses and extra time.

Adding to the confusion is that the right of survivorship designation differs from state to state. In Texas, for example, rights of survivorship aren’t implied. In a joint tenancy only, when one owner dies, his/her share of the property passes to the decedent’s heirs or to the people named in the decedent’s will. If there is no will, it’s possible the property could end up in probate, where the courts decide how it is to be distributed. Meanwhile, rights of survivorship guarantee that the decedent’s share of the property automatically goes to the surviving owners, with no probate necessary.

On the other hand, in California, “rights of survivorship” is automatically assumed in most joint tenant cases, meaning it doesn’t need to be spelled out through a deed or paperwork. 

For Spouses Alone: Community Property and Tenancy by the Entirety

Another legal term that crops up is community property. In most states, community property laws apply only to assets held by married couples, or domestic partners. Under these laws, spouses aren’t allowed to pass on their property interests to anyone other than their surviving husbands or wives. As of this writing, nine states had community property laws. These are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Meanwhile, a 10th state -- Alaska -- has an “opt-in” community property law allowing division of property, assuming both parties agree.

Tenancy by Entirety, or TBE, is another legal set-up for co-owning property spouses. While TBE is similar to community property laws, the difference rests with creditors who might have claims against one of the spouses. Through a TBE, those creditors can’t pursue a jointly-held property to pay off debts. If, however, both spouses racked up debt, creditors can pursue, and demand the sale of, the jointly-held property.

Much like there are community property-only states, there are also TBE-only states. These include Alaska, Illinois, Indiana, Kentucky, Michigan, New York, North Carolina, and Oregon for real estate only. Meanwhile, Arkansas, Delaware, Florida, Hawaii, Maryland, Massachusetts, Mississippi, Missouri, New Jersey, Oklahoma, Pennsylvania, Rhode Island, Tennessee, Vermont, Virginia, and Wyoming recognize TBEs of all types.

Better Call... Your Attorney

The idea behind joint tenancy is the avoidance of costly property probate upon a partner’s death. However, the takeaway is that a joint tenancy, by itself, might not automatically confer rights of survivorship, especially when it comes to property ownership and disposition. Whether your partnership is formed to hold real estate for investment, or consists of owning a vacation home with your spouse, it’s a good idea to ensure your legal advisor has a hand in crafting the agreement, to ensure your ownership rights are protected. 

This material is for general information and educational purposes only. Information is based on data gathered from what we believe are reliable sources. It is not guaranteed as to accuracy, does not purport to be complete and is not intended to be used as a primary basis for investment decisions. It should also not be construed as advice meeting the particular investment needs of any investor.

Realized does not offer legal or tax advice. As such, this information should not be used as a substitute for consultation with professional accounting, tax, legal or other competent advisers. Before making any decision or taking any action, you should consult with a qualified professional.

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