Tenants in Common vs Joint Tenants with Rights of Survivorship

Tenants in Common vs Joint Tenants with Rights of Survivorship

June 20, 2018

Tanko Law Montana

Co-ownership of property can be a very tricky subject in today’s world. Whether it’s a married couple, business partners, roommates, or a romantic couple that simply lives together. Each type of living arrangement has different benefits and drawbacks, and there’s a lot of confusing terminology that goes along with it. Unfortunately, these terms carry legal implications that are very important regarding the passing on of property.


Two of the most important terms you’ll hear are, “tenants in common,” and “joint tenants with rights of survivorship.” The second of these is often abbreviated as “JTWROS,” for brevity. While both might sound on the surface like they’re quite similar, there are core differences between them that will make all the difference. Let’s examine the difference between Tenants in Common and Joint Tenants with Rights of Survivorship, what they mean and why it matters to your living arrangements.


Deeds and Ownership


Ownership of property in the United States is expressed in the form of titles and deeds. These documents grant the buyer ownership of the property in question. When you own a house and land you have a deed. When you own a car, you have a title to the car. Usually these documents are held by the lender who financed your purchase until you’ve paid off the loan, and then the deed comes to you.


To guarantee an unbroken chain of record keeping, each deed includes the names of the sellers as well as the buyers. Any vesting chosen by the buyers (also called the grantees) is also listed on the deed, after their names. The deed will also include a description of the property, and will be filed as public record in the county clerk’s office.


What Is Vesting?


Vesting is an important part of the transferal of property, especially if co-ownership is going to be had. This is the term for establishing co-tenancy rules for the property. They clarify the percentage of the property that each tenant will hold, and what will occur when one tenant passes on. The two most common forms of vesting are tenants in common and joint tenants with rights of survivorship.


Tenants in Common


Tenants in common refers to a situation where two or more people live in a property and the ownership shares are divided between them. In such a case, the property shares owned by any given tenant will pass to that tenant’s estate upon their death.


When the parties involved in an ownership stake are not related, this can be a beneficial arrangement. It allows you to determine what happens with your property when you die. While it still might require going through the probate process, so long as you have made your wishes clear, the process is often smooth.


In addition, you can sell your interest in the property any time you like; you don’t need the consent or approval of the other property owners or tenants. You can transfer, assign interest or even mortgage your interest in the property.


Ownership stakes in a Tenants in Common situation do not have to be equal. It’s possible for two tenants to hold equal shares in a property, it can be a 60/40 split, it can be three owners with a 33/33/34 split, or any other combination, so long as the ownership percentages equal 100%. Each share is separate and individual from one another, which is what allows for transferal, mortgaging or sale.


Things to Consider with Tenants in Common


There are a number of things to consider when entering into a tenant-in-common agreement. First, just as you can transfer your shares, so can each of the other owners, and you can’t stop or challenge them from doing so.


Because of this, it’s a good idea to draft a formal agreement between all of the various owners to address this potential situation. Having an agreement or contract in place can help to avoid a lot of stress and conflict on a personal level, or a financial one.


Joint Tenants with Rights of Survivorship


Joint tenants with rights of survivorship is the kind of co-ownership and cohabitation usually held by married couples. In this form of co-ownership, the couple each has an equal share in ownership, and there’s no division of rights. This means that if one party in ownership wishes to transfer the ownership, the other owner (or owners) must consent and sign the deed.


In this case, when one owner passes away, their share of ownership is automatically passed to the survivor. Survivorship rights take precedence over the inheritance rules or will in the given state. That means if you pass away and leave your home to your kids, but your spouse is still alive, your spouse automatically inherits the property until they, too, pass away. At this point the property will pass on according to your final wishes.


With a JTWROS arrangement, when one party passes on there is no probate process necessary. The property automatically transfers to the surviving owner. Probate, however, is necessary after the final owner dies. Still, as with any final arrangements, if your final will and estate planning is in order, the process can be relatively fast and simple for your heirs.


Things to Consider in JTWROS


In a JTWROS arrangement, there are also potential pitfalls. If relations between the two parties deteriorate, such as in a separation or divorce, or when business partners are splitting their interest, both parties have to agree on any sale or transfer of the property. The same issues can arise if, for example, the asset is owned with a child who is estranged from the parents.


In addition, if one owner of such a property dies and is heavily in debt, if the probate courts are afraid the surviving owner will liquidate the funds to avoid paying the debt, they can freeze the account. Accounts can also be frozen if there’s some dispute over contributions to the account or if it’s an ownership of convenience.


Working with an Estate Planning Attorney


When making these decisions it’s essential to have the right legal guidance to ensure you’ve considered all the benefits and pitfalls. If you’re in Colorado and you need help or guidance in this area, contact Tanko Law for help today.

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