What Is a Joint Tenancy With Rights of Survivorship?
Let’s start with the “joint tenants” part of JTWROS. Joint tenants are two or more people who own property together. Four requirements or “unities” must be present to allow them to hold title this way:
Unity of Time: They must take possession of the property concurrently, at the same time.Unity of Title: They must take title by the same “instrument.” An instrument is any document that legally transfers property, such as a deed or a will. Unity of Interest: Each tenant or owner has an equal interest in the property. For example, three tenants would each have a one-third ownership share. This is the case even if one of them paid for the entire property—they would not be given an additional ownership stake. Unity of Possession: Each tenant has a right to possess and enjoy the entire property even though they do not have a 100% ownership interest.
The Right to Convey the Property
Joint tenants can sell or transfer their shares to third parties without the approval or consent of the others. If Tenant A transfers or sells his interest to “Joe,” the joint tenancy that was in place between Tenants B and C would remain in place—these two individuals would still be joint tenants with rights of survivorship. But because of the unity of time and unity of title requirements, Joe would not become a joint tenant with them. He did not take title at the same time or with the same instrument. Joe would, therefore, become a tenant-in-common with Tenants B and C. If Joe passed away, his share of the property would go to his heirs as part of his estate, not to Tenants B and C.
What Is Survivorship?
The survivorship provision of a JTWROS allows the owners to automatically and immediately inherit another owner’s share if one of them should die. The property would pass outside probate and by operation of law. This means that a tenant cannot transfer their share to beneficiaries in their will, and their heirs cannot inherit it if they die without a last will and testament. Their share automatically belongs to their co-tenants at their death. If Tenant A dies, Tenants B and C would now each hold a 50% interest in the property rather than a one-third interest. Because the transfer does not require probate, Tenant A’s creditors would have no entitlement to their share and it would not be included in the estate to pay the final bills.
Other Forms of Joint Ownership
This type of ownership can also be used with bank and investment accounts, as well as stocks, bonds, and business interests. For example, this form of ownership could keep a business running without interruption if one of the owners dies. It’s not usually the default form of ownership when an asset is held by two or more people. They would typically hold title as tenants in common unless they specifically request this legal arrangement. Married tenants default to tenants by the entirety in most states.
Disadvantages of JTWROS
If there is conflict between the joint tenants at some point in the relationship, a JTWROS can make it difficult to move forward because agreement must be reached by all involved parties to sell the property or take a loan out on it. In cases where the deceased had extreme debt, a probate judge might freeze the account to allow creditors to get some relief.
