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February 06, 2019

Joint Tenancy


Word of the day

Joint Tenancy

An estate or unit of interest in real estate that is owned by two or more natural persons, all owning equal shares with rights of survivorship. The basic idea of a joint tenancy is unity of own¬ership; title is held as though all owners collectively constituted one person, a fictitious entity. The death of one joint tenant does not destroy the owning unit—it only reduces by one the number of persons who jointly own the unit. The remaining joint tenants receive the deceased tenant’s interest by the right of survivorship. Thus, the decedent’s interest cannot be transferred by will or descent. As each successive joint tenant dies, the remaining tenants acquire the interest of the deceased. The last survivor takes title in severalty, fully inheritable at the survivor’s death by heirs and devisees.

Some form of joint tenancy is recognized in most states, although several states have opted to eliminate the right of survivorship as a distinguishing characteristic. Sometimes called the “poor man’s will,” the fact that one holds title to property as a joint tenant is no reason for a person not to make a will. Joint tenancy does avoid a formal probate proceeding, however.

Traditionally, four unities are required to create a joint tenancy: unity of title, unity of time, unity of interest, and unity of possession. All unities must be present when title is acquired by one deed, executed and delivered at one time that conveys equal interests to all the grantees, who hold undivided possession of the property as joint tenants.

A joint tenancy can be created only by grant or purchase (by a deed of conveyance) or by devise (will)—it cannot be created by operation of law. The grantees or devisees must be specifically named as joint tenants. In most states, a deed or will that is unspecific about the grantees’ or devisees’ tenancy will pass title to the parties as tenants in common. Typical wording used to create a joint tenancy may be as follows: “To Morton Charles and Seymour Berkowitz, and to the survivor of them, and his or her heirs and assigns as joint tenants, with rights of survivorship, and not as tenants in common.”

Debtors cannot protect themselves from creditors’ claims by taking title to property in joint tenancy. The creditor has every right to attach the debtor’s interest in jointly held property and force a partition. However, if the joint tenant dies before the creditor seizes that tenant’s interest then the creditor loses his interest because the surviving tenant takes the property free from the claims of the decedent’s creditors. On the other hand, a creditor of the surviving joint tenant has substantially increased his security.

One principal advantage of joint tenancy is avoiding the delay and expense of probate proceed¬ings because the surviving joint tenant immediately becomes the sole owner of the property. The current value of the property is not included in the total value of the estate on which probate fees are assessed. In addition, the survivor holds the property free from the debts of the deceased joint tenant and from heirs against her interest.

Joint tenants give up the right to dispose of their individual interests by will, thus precluding the use of estate planning to minimize the estate taxes. Although not subject to probate proceedings, joint tenancies are subject to gift taxes, income taxes, and inheritance taxes, in addition to federal estate taxes. A purchaser should discuss these tax consequences with experienced tax counsel before deciding whether to hold title to the property in joint tenancy. In addition, joint tenancy or tenancy by the entirety may not be appropriate for people with children from a prior marriage.
 

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