Joint tenants with right of survivorship is a form of property ownership where two or more individuals hold equal rights to an asset. When one owner dies, their share automatically passes to the surviving co-owners without the need for probate. This arrangement is often used for real estate, bank accounts, and other jointly owned assets, offering a streamlined way to transfer ownership. However, all joint tenants must have an equal interest in the property, and the arrangement comes with legal and financial implications that require careful consideration.
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What Is Joint Tenants With Right of Survivorship?
Joint tenancy with right of survivorship is a legal structure in which two or more individuals hold equal ownership and entitlement to a property or financial account. The defining feature is the automatic transfer of ownership rights to the surviving co-owner(s) upon the death of one owner. This transfer bypasses probate, which can save time and reduce legal expenses.
To establish joint ownership with right of survivorship, all co-owners must acquire their interests simultaneously, and each must hold an equal share of the property. This arrangement is commonly used among spouses, business partners or family members to make it easier to transfer assets such as homes, investment accounts or bank accounts
Being joint tenants with right of survivorship isn’t the same as naming someone as beneficiary to a taxable brokerage account or retirement account. Joint tenants have equal rights to the asset while both are still living. Then when one dies, the remaining tenant assumes control over the entire account. However, beneficiary can only receive assets from the account once the account owner dies.
It’s important to note that some accounts can’t be titled using a joint tenancy with right of survivorship arrangement. For example, custodial accounts established for children would typically fall under a child’s ownership. However, you (or another adult) could act as a custodian until the child comes of age.
Joint Tenants vs. Tenancy in Common
Tenancy in common is another way to title assets that you own with someone else. This arrangement is typically used in connection with real property. For example, that may include a primary home or investment property you own together. You also could apply it to financial accounts.
When you have a tenancy in common agreement, ownership in the property or asset isn’t shared equally. If one person passes away, then the tenant in common doesn’t maintain their right to own the property. Instead, the ownership stake of the deceased person passes on to their heirs.
Benefits of Joint Tenants With Right of Survivorship
One of the main advantages of joint tenants with right of survivorship is the ability to bypass probate. When one owner passes away, their share of the property automatically transfers to the surviving co-owner(s), streamlining the inheritance process. This can save both time and money, avoiding the delays and legal fees often associated with probate court.
Another benefit is simplicity in asset management. Joint ownership with right of survivorship ensures that all owners have equal rights and responsibilities, making it easier to manage jointly owned property. This arrangement is particularly useful for married couples or business partners who share financial goals, as it provides clarity and avoids disputes over ownership.
This form of ownership can also provide peace of mind in planning for the future. The automatic transfer of ownership ensures that surviving co-owners maintain control of the asset without intervention from outside parties, such as creditors of the deceased or distant relatives.
Additionally, joint ownership with right of survivorship allows co-owners to enjoy shared access to income-producing assets, such as rental properties or investment accounts. Any income or profits are divided equally among the owners, simplifying financial arrangements.
Cons of Joint Tenancy
While joint tenants with right of survivorship offers benefits, it also has significant drawbacks that require careful consideration. One key limitation is the lack of flexibility. All co-owners share equal ownership, meaning no individual can sell, transfer, or encumber their share of the property without unanimous consent. This can create challenges if one owner wishes to liquidate their interest or disagrees on the property’s use.
Another potential drawback is shared liability. Each co-owner is fully responsible for debts, taxes, or legal claims associated with the property. For example, if one co-owner defaults on personal debts, creditors could pursue the jointly held asset, potentially putting the other owners’ interests at risk.
Additionally, this type of ownership can complicate estate planning. While the arrangement bypasses probate, it overrides any provisions in a will. This lack of control can be problematic if co-owners later wish to direct their share of the property to specific heirs or beneficiaries.
Lastly, joint ownership could lead to unintended conflicts among co-owners. Disputes over maintenance costs, property management, or future plans can strain relationships and make the arrangement difficult to sustain.
Bottom Line
Setting up a brokerage account using joint tenants with right of survivorship has its advantages. But it can also have downsides. You might consider tenancy in common if you want your assets divided differently when you pass away. Talking to an estate planning attorney could help if you’re not sure which option to use. They can help you title investment accounts or other assets with a spouse, business partner or someone else.
Investment Tips
- Consider talking to a financial advisor about setting up a joint brokerage account. Ask whether or not it makes sense for your situation. Your advisor can help you weigh the pros and cons. Also, you can compare the benefits of being joint tenants with right of survivorship versus tenants in common. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with up to three vetted financial advisors who serve your area, and you can have a free introductory call with your advisor matches to decide which one you feel is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
- Choose wisely when naming beneficiaries for qualified retirement accounts and life insurance policies. Remember, a named beneficiary would supersede the terms of your will. As you’re planning your estate, consider who will receive your 401(k), IRA, life insurance benefits, etc.
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