When opening an account, acquiring property, purchasing life insurance or even buying a house, little thought is often given to the method of holding title. Usually it first comes up when the signature card or title papers are presented. Then, with little forethought, parties generally acquire title by joint tenancy, especially a husband and wife. The method of owning property or accounts by more than one individual or entity can have substantial consequences involving gift taxes, use of the property, disposition on death and exposure to creditor claims. Therefore, selection of the method of joint ownership merits careful consideration.
The most popular form of joint ownership is joint tenancy. Each joint tenant, and there can be many, has an equal and undivided interest in the entire property, and each has the right to use and benefit from the entire property. No joint tenant can claim ownership of any specific portion of the property. One major characteristic is the right of survivorship; on death the joint tenant’s interest terminates and the surviving joint tenants own all of the property without the need for probate. A derivation of joint tenancy is tenancy by the entirety, available only to married couples for title to their marital residence. Tenancy by the entirety provides all of the benefits of joint tenancy while protecting the marital home from creditors of any one spouse.
Tenants in common also own an undivided interest in the whole property, but their interests can be determined by a percentage. Unless otherwise agreed, tenants in common own an equal percentage of the property. There is no right of survivorship, so that on the death of a tenant in common his ownership interest passes to his heirs or his estate.
These most common forms of joint ownership are not your only choice. Partnerships, trusts, land trusts, corporations and limited liability entities are additional ways to jointly own property, with each having specific benefits and limitations. The type of property, the parties’ expectations, tax liability, the intended use, liquidity and protection of the jointly owned property often dictate the best method of joint ownership to select in a particular situation. In some situations, the method selected can be significant.
Brooks, Tarulis & Tibble, LLC has extensive experience in counseling clients on various methods of joint ownership and which method may be best in a particular circumstance, including estate and business succession planning and considerations. If we can provide you with further information in this regard, please contact me.