Joint tenancy with right of survivorship is a property ownership arrangement where two or more people own equal shares of an asset, and when one owner dies, their share automatically transfers to the surviving owner or owners. This transfer happens by operation of law, meaning it occurs automatically without going through probate court or following instructions in a will.
Our friends at Hirani Law frequently discuss joint tenancy as a simple tool for transferring certain assets directly to loved ones. A probate lawyer can explain how joint tenancy fits into your overall plan and help you understand when this ownership structure makes sense and when it creates unintended problems.
How Joint Tenancy Works
Joint tenants each own an undivided equal interest in the property. If three people own a house as joint tenants, each owns one-third. No individual owns a specific portion of the property. Instead, all owners have rights to the entire property.
The right of survivorship is what makes this ownership form special. When one joint tenant dies, their interest doesn’t pass through their estate or follow their will’s instructions. Instead, it automatically transfers to the remaining joint tenants.
If two siblings own property as joint tenants and one dies, the surviving sibling becomes the sole owner immediately. The deceased sibling’s share doesn’t go through probate, doesn’t pass to the deceased’s children or spouse, and isn’t controlled by the deceased’s will.
Requirements for Valid Joint Tenancy
Joint tenancy requires four unities that must exist simultaneously. The unity of time means all owners must acquire their interests at the same moment. Unity of title requires all owners to receive their interests through the same deed or document. Unity of interest means each owner must have an equal share. Unity of possession gives each owner equal rights to possess and use the entire property.
According to the Legal Information Institute, breaking any of these unities converts joint tenancy to a different ownership form, typically tenancy in common.
The deed or title must explicitly state that ownership is held as “joint tenants with right of survivorship” or similar language required by your state. Simply listing multiple names on a deed doesn’t create joint tenancy. The survivorship language is required.
Joint Tenancy vs. Tenancy in Common
Tenancy in common is the default ownership form when multiple people own property without specifying otherwise. Tenants in common can own unequal shares, acquire interests at different times, and pass their shares through their estates when they die.
Right of survivorship is the key difference. Tenants in common don’t have survivorship rights. When a tenant in common dies, their share passes according to their will or state intestate succession laws, not automatically to co-owners.
Joint tenancy is more restrictive but provides probate avoidance. Tenancy in common offers more flexibility but requires probate for deceased owners’ shares.
Common Uses for Joint Tenancy
Married couples frequently use joint tenancy for homes, bank accounts, and vehicles. The surviving spouse automatically becomes sole owner without probate delay or expense.
Elderly parents sometimes add adult children as joint tenants on bank accounts or real estate to simplify asset transfer at death. This approach provides probate avoidance but creates significant risks we’ll discuss shortly.
Investment property owned by siblings or business partners might use joint tenancy, though this can create complications if one owner wants to sell or if relationships deteriorate.
Common jointly-owned assets include:
- Primary residences and vacation homes
- Bank accounts and certificates of deposit
- Investment and brokerage accounts
- Vehicles and boats
- Vacant land and rental properties
Probate Avoidance Benefits
Joint tenancy’s main advantage is avoiding probate. When a joint tenant dies, the surviving owner simply provides a death certificate to banks, title companies, or other institutions to remove the deceased owner’s name.
This immediate transfer prevents the delays, costs, and public disclosure associated with probate. Surviving owners can access accounts, sell property, or continue using assets without waiting for court proceedings to conclude.
For modest estates or specific assets like a family home, joint tenancy provides simple, effective probate avoidance without the cost of creating trusts.
Tax Implications
Basis step-up rules affect jointly-owned property at death differently depending on the relationship between owners and state property laws. When one spouse dies, community property states typically provide a full basis step-up on jointly-owned property. Non-community property states might provide only a half basis step-up.
Between non-spouses, only the deceased owner’s share receives a basis step-up. If siblings own property jointly, when one dies, only half the property gets the favorable tax treatment.
Gift tax considerations apply when adding joint tenants. Creating joint tenancy by adding someone to existing property constitutes a gift of partial ownership. The value might require filing gift tax returns even if no tax is owed.
The Risks and Downsides
Joint tenancy creates significant risks that many people don’t consider. Adding someone as a joint tenant means giving them current ownership rights, not just future inheritance rights. They can withdraw funds from joint bank accounts, force property sales, or encumber assets with liens.
Co-owner creditor problems affect jointly-owned property. If your joint tenant faces lawsuits, bankruptcy, or divorce, your shared property might be vulnerable to their creditors or divorcing spouse.
Loss of control becomes permanent once you create joint tenancy. You cannot sell, mortgage, or transfer the property without the co-owner’s consent. What seemed like a simple estate planning solution becomes a trap if relationships deteriorate or the co-owner refuses to cooperate.
Unintended disinheritance affects other family members. Adding one child as a joint tenant means the property passes entirely to that child, excluding your other children regardless of what your will says.
Medicaid and Long-Term Care Implications
Creating joint tenancy with children or others triggers Medicaid’s five-year look-back period. If you need nursing home care within five years of adding a joint tenant, Medicaid might impose penalty periods affecting coverage.
Joint tenancy doesn’t protect assets from Medicaid estate recovery in most situations. The property remains vulnerable despite having a surviving joint tenant.
Severance and Termination
Joint tenancy can be severed, converting it to tenancy in common. When one joint tenant transfers their interest to a third party, the joint tenancy is broken. The new owner becomes a tenant in common with the remaining joint tenants.
In some states, simply recording a deed from yourself to yourself as a tenant in common severs joint tenancy. Other states require actual transfer to a different person. Understanding your state’s severance rules matters if you want to convert joint tenancy to different ownership.
Special Considerations for Different Asset Types
Real estate joint tenancy requires recording new deeds with proper language. Simply adding someone to an existing deed might not create valid joint tenancy without explicit survivorship language.
Bank accounts use simpler forms but create immediate access for all joint owners. Anyone on the account can withdraw the entire balance, not just their proportional share.
Investment accounts have specific rules about joint tenancy and might require account restructuring or new account openings to establish proper joint ownership.
Alternatives to Consider
Transfer-on-death designations for bank accounts and securities provide similar probate avoidance without giving up control during your lifetime. Beneficiaries receive assets at your death but have no current ownership rights.
Revocable living trusts offer more flexible probate avoidance with better control and protection than joint tenancy. You retain complete control while alive and can direct complex distribution schemes.
Payable-on-death accounts and beneficiary deeds accomplish asset transfer without the risks of joint ownership during your lifetime.
When Joint Tenancy Makes Sense
Joint tenancy works well in specific situations. Married couples with similar estate planning goals benefit from joint tenancy on homes and shared accounts. The automatic transfer to the surviving spouse typically aligns with both partners’ wishes.
Modest bank accounts between parents and adult children can work if the funds are truly meant for that child and the amount is small enough that the loss-of-control risk is minimal.
Simple estates with one or two beneficiaries and no complicated family dynamics might use joint tenancy effectively when combined with other planning tools.
Coordinating with Your Estate Plan
Joint tenancy should coordinate with your overall estate plan, not contradict it. If your will divides assets equally among three children but joint tenancy passes your largest asset to only one child, you haven’t achieved equal distribution.
Calculate total asset distribution across all ownership forms, beneficiary designations, and will provisions to verify your complete plan accomplishes your actual goals.
Making Informed Decisions
Joint tenancy offers valuable probate avoidance benefits but creates immediate ownership consequences that surprise many people. Understanding both advantages and risks helps you make informed choices about when to use this ownership structure.
We help clients evaluate whether joint tenancy serves their situations or whether alternative planning tools better accomplish their goals without the inherent risks. Your property ownership structure should protect your interests during your lifetime while providing efficient transfer at death. Take time to understand all implications before creating joint tenancy arrangements and explore whether other options might serve your needs with fewer downsides.
