Joint Tenancy With Rights of Survivorship vs. Tenants in Common

by Kathryn Hatter

There are a variety of ways to assume title of an asset. Each ownership option involves different ownership rights with different legal implications. Additionally, the ownership option you use also determines how you must transfer the asset upon death. An investigation into joint tenancy with rights of survivorship versus tenants in common may help you decide which title option to use.

Tenants In Common

When two or more people own an undivided asset, each person owns an equal fraction of the asset. Each tenant owns and has the right to possess the entire asset, provided that this possession does not exclude the other tenants. Any actions that affect the property must have the prior written authorization of the other tenants. The tenants can act together to manage, mortgage, lease or sell the asset. Tenants may act independently to sell or give away undivided interest in the asset without consulting the other tenants. After selling an interest in the asset, the new tenant joins the tenancy in common with the other tenants. If a tenant dies, the control of this interest transfers to the estate of the deceased tenant or laws that govern the intestate tenant’s estate govern the interest. The surviving owners do not have rights of survivorship. Therefore, ownership transfers to the surviving owners only if the deceased owner stipulated this in a will.

Joint Tenancy With Rights of Survivorship

When two or more people own an asset as joint tenants with right of survivorship, the owners have the same undivided ownership as tenants in common. A significant difference in JTWRS involves a specific agreement about what happens to the asset at the death of one of the tenants. Without the right of survivorship clause, the title is a basic tenant in common ownership. Conversely, when one of the tenants in a JTWRS dies, the asset passes to the surviving joint tenants automatically without the need for probate proceedings. If the asset has more than two owners, the surviving owners share ownership equally of the undivided asset.

Tax Implications

Joint tenants and tenants in common have a responsibility for income taxes for their fraction of the asset. Unmarried joint tenants must report revenue separately and prorate deductions and taxes separately. Joint tenancy transfers between spouses will not incur federal estate taxes. Tenants in common who own real estate property will receive a single property tax bill. The tenants must divide the bill according to individual interest in the property. Any reassessments that affect property taxes require refiguring each tenant’s tax responsibility.

Estate Implications

Tenants in joint tenancy with rights of survivorship may inadvertently disinherit family members. This could occur because the rights of survivorship clause stipulates that ownership passes directly to co-tenants. Rights of survivorship rights supersede a will. Tenants in common do not have the same estate implications.

Credit Implications

Tenants in common and joint tenants do not have asset protection. For example, if one tenant receives a judgment from a creditor against the asset, the creditor can petition for a foreclosure or a partition of the property. With a foreclosure, the non-debtor tenants lose the asset but they get their share of the proceeds from the sale. The creditor would receive the debtor tenant’s share of the proceeds. With a partition of the property, the creditor gains control of the debtor tenant's share of the asset.

About the Author

Kathryn Hatter is a veteran home-school educator, as well as an accomplished gardener, quilter, crocheter, cook, decorator and digital graphics creator. As a regular contributor to Natural News, many of Hatter's Internet publications focus on natural health and parenting. Hatter has also had publication on home improvement websites such as Redbeacon.

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