Why do most couples hold title to their real estate in joint tenancy?

Despite equal ownership rights, there are drawbacks
By: Robert J. Bruss: Inman News
If you are married, or plan to be married someday, you probably wonder what is the best way to hold title to your house or condo (and other real estate investments).

Unless you're selfishly greedy and reply, "I want to hold title in my name alone," you might honestly answer, "I don't have a clue as to the best way to hold title with my spouse."

However, if you are a typical married couple buying your first house or condo, shortly before the time comes to have your names placed on the deed, you will turn to the attorney, real estate agent, or escrow officer handling the closing settlement and sheepishly ask, "Well, how do most couples take title?"

Bear in mind the answer to your key question might not be in your best interests.

That individual might just want to get your home sale closed quickly.

Frankly, unless you are speaking with a real estate attorney, the person you ask about how to hold title usually isn't qualified to answer. Instead, they might answer, "Most couples take title in joint tenancy." For most couples, that's how they take title to their biggest and most important investment.

JOINT-TENANCY OWNERSHIP IS NOT SIMPLE. To be technically correct, joint tenancy is "joint tenancy with right of survivorship." That means when one joint-tenant co-owner dies, the surviving joint tenant(s) automatically receives the ownership share of the deceased joint tenant without probate.

A deceased joint tenant's will has no effect on his or her joint-tenancy property (except in very limited situations, such as simultaneous death of all the joint tenants, perhaps a plane crash).

Probate avoidance is considered the biggest joint-tenancy advantage. All a surviving joint tenant needs to do in most states to clear the deceased joint tenant's name from the title is record (a) a certified copy of the death certificate and (b) an affidavit of survivorship.

TENANCY BY THE ENTIRETIES IS VERY SIMILAR. In 24 states, a husband and wife can hold title as tenants by the entireties, which has the same joint-tenancy survivorship benefit. But neither spouse can convey his/her tenancy by entirety share without the other spouse's signature. This overcomes the disadvantage joint tenants can convey their interest without the approval of the other joint tenant(s).

Tenancy by the entireties is available to married couples in Alaska, Arkansas, Delaware, Florida, Hawaii, Indiana, Kentucky, Maryland, Massachusetts, Michigan, Mississippi, Missouri, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon, Pennsylvania, Tennessee, Vermont, Virginia, Wyoming, and the District of Columbia.

JOINT TENANCY PROS AND CONS. Before discussing joint tenancy with your real estate attorney or other trusted adviser, it pays to know the seven key characteristics of holding title in joint tenancy with right of survivorship (JTWRS):

1. YOUR WILL HAS NO EFFECT ON JOINT-TENANCY PROPERTY. As explained earlier, when a joint tenant dies, their joint-tenancy share automatically goes to the surviving joint tenant(s). This characteristic can be especially important in second marriages where each spouse often wants to leave their half of joint-tenancy property to their children from a first marriage. An alternative is to hold title as tenants in common or in a revocable living trust.

2. JOINT TENANCY SHARES ARE ALWAYS EQUAL. Although there are usually only two joint-tenant co-owners, there is no limit to the number of joint-tenant co-owners. But each joint tenant always owns an equal share. That is because joint tenants must take title by the same deed at the same time.

For example, suppose husband and wife take title as joint tenants. Each owns a 50 percent interest. Later, they decide to add their adult daughter as a joint tenant. They can do this by signing a quit claim deed from themselves to themselves and the daughter as joint tenants. The result is each joint tenant now owns a one-third share.

3. PROBATE COSTS AND DELAYS ARE AVOIDED. A major perceived joint-tenancy advantage is the avoidance of probate court costs and delays after one joint tenant (or tenant by the entireties) dies.

4. ONE JOINT TENANT CAN FORCE A SALE OF THE PROPERTY. Most states have a law of partition. That means a joint-tenant co-owner can force a court-ordered sale of the property even if the other owner(s) resist selling. The same result applies to tenants in common.
5. ALL JOINT TENANTS HAVE A RIGHT TO OCCUPY AND MANAGE THE PROPERTY. Unless agreed otherwise, all joint tenants have a right to occupy the entire property and manage it. But this can become a problem if one joint tenant refuses to participate in key management decisions, such as refinancing the property, or renting it to a tenant.

If one or more joint tenants are not yet 18, a minor joint tenant cannot convey title or deal with real property except when represented by a court-appointed guardian. For this reason, it is usually not wise to add minors as joint tenant co-owners.

Another problem can develop if one joint tenant becomes incapacitated, such as due to a severe stroke or Alzheimer's disease. A court-appointed conservator might be needed to represent the incapacitated joint tenant's property interests.

6. A JOINT TENANT CAN SECRETLY CONVEY HIS/HER INTEREST. Joint tenants are usually husband and wife, or other close friends and relatives. However, in most states a joint tenant can convey his/her share by gift or sale without approval of the other joint tenant(s). Of course, if title is held by husband and wife as tenants by the entireties, this is not possible.
The most famous court decision on this issue was the 1980 case of Riddle v. Harmon (162 Cal.Rptr.530). Without telling her husband, the joint-tenant wife secretly signed and recorded her quit claim deed to herself as a tenant in common. She died shortly thereafter.

After her death, her husband presumed he owned the entire joint-tenancy property as surviving joint tenant. To his shock, he learned his late wife had dissolved the joint tenancy by the deed and her will left her 50 percent tenant-in-common share to a third party. The widower husband learned he owned his 50 percent share as a tenant in common with a stranger. Of course, either co-owner could force a sale of the property in a partition lawsuit.

7. JOINT-TENANCY MURDER LAWS PREVENT BENEFITS TO MURDERER. Every state has a statute prohibiting a murderer from benefiting from the murder of a joint tenant co-owner. When a joint tenant murders his/her joint-tenant co-owner, then the will of the deceased joint tenant, or the state law of intestate succession, determines who receives title to the deceased joint-tenant's share.

For example, after the recent famous trial of Scott Peterson for the murder of his wife Laci, where he was found guilty, suppose they owned their Modesto, Calif., house as joint tenants with right of survivorship. Under California law, as a convicted murderer Scott could not receive his late wife's joint tenancy share of the house and it would pass according to her will (or by the state law of intestate succession if she left no will).

8. SIMULTANEOUS DEATH OF JOINT TENANTS REQUIRES INDIVIDUAL WILLS. Although joint-tenancy co-ownership is not subject to the wills of the joint tenants, occasionally individual wills are necessary.

A key example is where all joint tenant co-owners are killed in a plane crash and it is impossible to determine which joint tenant survived the longest. In such a simultaneous death situation, the shares of the joint tenants will pass according to their wills as if they were tenant-in-common co-owners.

Or, one joint tenant might survive another joint tenant for a short time. That happened a few years ago in Berkeley, Calif. Joint tenancy co-owners Larry and his girlfriend, Lana, were on an evening walk. A drive-by shooter's bullet hit Larry. Another bullet hit Lana.

They were rushed to a nearby hospital. Lana died at 2:58 a.m. Larry was kept alive on a ventilator until 4:55 a.m. when he died.

Because Larry survived Lana by a short time, he was the surviving joint tenant of their properties. As a result, his relatives inherited all the joint-tenancy property under Larry's will. Lana's relatives received nothing because she was not the surviving joint tenant.

SUMMARY: Holding title to real estate in joint tenancy with right of survivorship (or tenancy by the entireties in states where that method is allowed) might not be the best way to hold co-ownership title to avoid probate costs and delays. Other alternatives include revocable living trusts. For full details, consultation with your real estate attorney and tax adviser is recommended.