Joint ownership is one of the ways multiple parties can share ownership of a property. The laws regarding joint ownership make it easier for co-owners to decide what rights each owner has to the property and what happens to property when one of the co-owners passes away or divorce, if the property owners are married.
Joint ownership laws are helpful in solving issues about property rights when there are multiple owners and one of the owners passes away. There are three basic types of joint ownership – joint tenancy, tenancy in common, and community property. Each of these types of joint ownership differs slightly, so if you’re considering owning property with someone else, it’s important that you know about each.
Joint Tenancy
Joint tenancy is often called joint tenancy with rights of survivorship. The right of survivorship allows property ownership to be automatically transferred to the surviving owner(s) when one owner passes away. The benefit of joint tenancy is that the property does not have to go through the probate process in which a will is verified before the property ownership is transferred. Joint tenancy decreases the amount of time and energy that’s spent handling the estate and dividing bequeathed assets.
If a co-owner passes away without a will, there is no question about who the property should be left to because joint tenancy laws have already addressed the issue. Even if there is a will leaving the property to someone other than the co-owner, joint tenancy laws prevail and the property ownership will be transferred to the surviving co-owner.
Tenancy in Common
Tenancy in common is another way that two or more people can hold title to a piece of property. The parties don’t have to be related and ownership doesn’t have to be equal among the co-owners. When one of the co-owners passes away their share of the property is passed on to a person designated in their will. It’s important that co-owner in a tenancy in common have a will stating to whom their share of their share of the property should be left.
The share of ownership is typically divided based on the amount each co-owner contributed to obtaining the property. Property proceeds and costs are divided among the co-owners based on their share of the property.
Community Property
Community property is a type of joint ownership between married couples that stipulates certain property is equally owned between both spouses. In the event of a death in a community property state, the decedent’s share of the property is passed on to the surviving co-owner. Community property laws call for an equitable division of community property when a couple is divorcing.
Each spouse can use a will to specify what should happen with their share of the property in the event of a death. The will supersedes community property laws.
Any property that’s purchased with earned income during the marriage, is considered community property. Separate property includes property that was owned before the marriage and property inherited or received as a gift. Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin are community property states.
Joint Ownership Estate Planning
As you’re planning your estate, you should know how you hold the title to any property that has other owners. Knowing this will help you and your estate attorney decide whether your will should state heirs to the property. Keep in mind that your estate will have to pay taxes on property that’s willed to a loved one. Choosing the right property ownership can help circumvent the strenuous probate process and avoid probate taxes.