Joint Tenancy

Joint tenancy is like a tenancy in common, but the main difference is that the joint
tenants have an undivided interest with rights of survivorship. An undivided interest
is an ownership right to use and possess the entire property. However, no single coowner can mortgage, sell, or otherwise convey any piece of the land without the
consent of all joint tenants. Often, joint tenants are relatives who have received the
property from a will.
When a joint tenant dies, the right of survivorship entitles each surviving co-owner
to an equal share of the deceaseds share of ownershipthus, each joint tenant
maintains an equal share with the surviving joint tenants. However, in some states,
the deed must explicitly confer the right of survivorship. The last joint tenant will
own the land as a tenant in severalty (meaning that the tenant owns the property
separately and distinct from any other, or, more simply, the tenant has sole
ownership), and will enjoy all of the rights as a sole owner of property.
A joint tenancy can only be created by intention or by will, not by implication or
operation of law. The deed must explicitly stipulate a joint tenancy, and the owners
must be explicitly identified as joint tenants.
In many states, 4 unities must be satisfied to create a joint tenancy:
unity of possession;
unity of interest;
unity of time;
unity of title.
Corollaries of these requirements of unity are that:
the title is acquired by 1 deed;
the deed is executed and delivered at 1 time; and
all tenants acquire an equal and undivided interest in the property.
Consequently, in many states, if an owner in severalty wants to create a joint
tenancy, the owner must convey the property to an intermediarya straw man
who then conveys the title to the joint tenants, including the original owner. Some
states have eliminated the need for a straw man, so the owner in severalty can
convey the property to herself and to others as joint tenants.
A joint tenancy can be terminated when any of the joint tenants convey their
ownership interest to another party, who then becomes a tenant in common with
the remaining joint tenants, but the original joint tenants retain their rights and

interest. A joint tenancy can also be terminated by a partition suit, which is a lawsuit
to either partition the property so that 1 or more of the joint tenants has title to a
specific portion of the property, or to petition the court to have it sold, dividing the
proceeds of the sale equally among the joint tenants.
Joint Tenancy Law
Almost all states allow joint ownership of property, but a few states have more
restrictions than most. Alaska, Oregon, and Tennessee allow only joint ownership of
property as tenants by the entirety, which is similar to joint tenancy, but is
restricted to married couples. Wisconsin allows a similar form of ownership for any
property acquired after January 1, 1986, which they refer to as community property
with rights of survivorship. In Texas, a joint tenancy can only be created by a
separate written agreement between the joint tenants.
Joint Tenancy Bank Accounts
A joint tenancy bank account differs from other types of joint tenancy property in
that their share of ownership in the account has no real meaning, since any of the
joint tenants can withdraw all of the money. To prevent the withdrawal of all the
money by one tenant, some banks allow the opener of the account to require the
signatures of all the joint tenants for any withdrawal of money.
A joint tenancy bank account is often used as a nonprobate transfer device, but this
use has several disadvantages. Probate courts often challenge the joint tenancy as
something that the account holders did not actually intend, but simply signed the
form that many banks use as a default to open accounts with multiple users.
Although unlikely, a joint tenancy bank account may also incur a gift tax liability for
the tenant who contributed most of the money for the account. However, any gift
tax liability will only be incurred in the year when the other joint tenants individually
withdraw more than the annual gift exclusion, which, in 2011, was $13,000.
Joint Tenancy Safe Deposit Boxes
Safe-deposit boxes can also be held as a joint tenancy, which always means that
any of the joint tenants has access to anything in the safe-deposit box. However, it
does not necessarily mean that the contents of the safe-deposit box are also held
under joint tenancy, unless it is stipulated in the documents that must be signed
when opening the account.
Joint Tenancy Taxation
If a husband and wife own any property as joint tenants or by tenancy by the
entirety, then both spouses own an equal interest in the property, so when one
spouse dies, 50% of the market value of jointly owned property is included in the
decedent's estate, regardless of how much the decedent actually contributed to the
property. For unmarried joint tenants, IRC 2040 attributes the value of all of the

property to the first joint owner to die, less whatever any of the surviving tenants
can prove that they had contributed.
A joint tenancy with a non-spouse can also be a taxable gift, if one joint tenant
contributed more than half of the money for the property, and the amount is greater
than the annual gift tax exclusion, which, in 2011, was $13,000. Although no tax gift
taxes have to be paid, a gift tax return will have to be filed, which will reduce the
total lifetime exemptions available to offset future gift or estate transferences
The surviving joint tenants receive a stepped-up basis for only the decedent's share
of the property the tax basis of their own shares remains the same. However, if
the surviving joint tenants cannot prove that they paid their share for the property,
then the entire property will receive a stepped-up basis, since it will be includable in
the estate of the decedent. If community property is held as a joint tenancy, then
the entire property receives a stepped-up basis upon the death of one spouse,
regardless of what the decedent contributed.
Any property for which a joint tenancy was established before 1977 and for joint
tenancies in common-law states receives a full stepped-up basis, even if the joint
tenants are not married. However, the value of the joint property is includable in the
estate of the first joint tenant to die.
Tip: Anyone who has bought property as joint tenants before 1977 should not
change the form of ownership, such as putting it into a living trust, since many
localities reassess real estate for taxation when it changes hands. However, if an
owner of real estate creates a joint tenancy while retaining a partial interest in the
property, then, in most localities, the change of ownership does not usually trigger a
reassessment, although this should be verified for a particular jurisdiction.
Advantages and Disadvantages Of Joint Tenancy
A joint tenancy is usually not the best way to avoid probate, but may be
advantageous when one of the joint tenants is likely to die soon; it avoids a lot of
paperwork, and is simpler than most other probate avoidance schemes.
However, joint tenancy has several disadvantages:
A gift of the joint ownership cannot be revoked.
Any joint tenant can end the joint tenancy while he lives; in which case, he becomes
a tenant in common and can sell his interest in the property. The remaining joint
tenants remain joint tenants for the remaining shares.
Creditors of a joint tenant may attach his share, or the court may order the whole
property to be sold so that the creditor can be paid. Although the surviving tenants
are not responsible for the debt of a deceased joint tenant, some states allow a
creditor to attach the property:

if the deceased person had pledged his interest in the property as security for a
loan;
if the creditors have already initiated legal steps to collect the money before the
tenant died;
or the creditor can show that the joint tenancy arrangement was a scheme to
defraud creditors.
Incapacity may make joint tenancy difficult since some decisions, such as selling the
property, would have to be made by all of the tenants. Someone with a durable
power of attorney for the incapacitated joint tenant would have to be available to
decide for him.
A multiple party account without the right of survivorship (a.k.a. multiple-person
account), which banks sometimes call a convenience account, may be more
advantageous in some situations than a joint tenancy, such as when the child wants
to help an aged parent manage their bank account. One of the account holders acts
as a fiduciary or agent for the other. The agent must act in the best interest of the
other account holders and the account is not subject to any creditors of the agent.
Since there's no right of survivorship, the agent does not receive the property in the
account when the other account holders die, but rather, it becomes part of their
estate. Therefore, a multiple-party account does not avoid probate, but it may help
to avoid conflicts in certain situations, such as can occur in a joint tenancy, where
children who were not co-tenants to a parent's account may feel entitled to some
portion of the money.
Although a durable power of attorney is a more effective tool to help an aged
parent, the multiple-party account is easier to set up and less time-consuming.
About half the states have adopted the Uniform Multiple Person Accounts Act, but
even in those states that have not adopted the model legislation, a person may,
nonetheless, set up such an account at a bank if it offers it.
Creating a Joint Tenancy
For titled property, a joint tenancy is easy to create, but the exact language
required on the deed differs from state to state, and some states may have other
requirements. For instance, a joint tenancy in Florida can only be created by deed
and in Texas the joint tenancy owners must sign a separate written contract
agreeing to the joint tenancy. Generally, the contract must specify the joint tenancy
with specific words such as "joint tenancy with right of survivorship," sometimes
abbreviated as "JTWROS."
To create a joint tenancy for personal property, the joint tenants must sign a
document declaring that they own the property as joint tenants. The document does

not have to be filed with any government agency, but the signatures should be
notarized, as evidence of the joint ownership agreement.
Generally, a joint tenancy is ownership by equal shares, because most states do not
provide a means of showing the percentage of ownership on the deed. However,
Colorado, Connecticut, Ohio, and Vermont do have deeds where differing
percentages of ownership can be written. In states that don't allow it, unequal
ownership can only be achieved as tenants in common.
Obtaining Title to Joint Tenancy Property After the Death of a Joint Tenant
The automatic right of survivorship simply means that the legal task of transferring
the deed to the remaining joint tenants is relatively simple. However, the surviving
tenants still have to perform certain procedures to remove the name of the
deceased joint tenant. Generally, the joint tenants must establish that the joint
tenant has died by filing a copy of the death certificate with the appropriate
government agency or recorder of title; then they must file a document, which is
usually an affidavit, establishing that the surviving owners are the sole owners of
the property.
One problem of joint tenancy is that tax liens may be filed by the state if the state
has either an estate or inheritance tax. Tax liens may be imposed on all of the joint
property or just the deceased joint tenant's property. Clear title cannot be
transferred until the tax liens are removed, which may involve posting a bond, filing
a final inheritance or estate tax return, or satisfying other requirements imposed by
law.
If the property of a joint tenancy is valuable enough for the joint tenant to owe
federal estate taxes, then clear title may not be obtainable until the value of the
taxable estate is determined and the taxes are paid, usually with the filing of the
estate tax return, which could be 9 months or more after the death of the joint
tenant. However, the IRS may allow the transfer of joint tenancy property if there is
an accurate estimate of the property value and enough assets to pay the
decedent's estate taxes.