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What is Joint Tenancy?
Joint tenancy is a form of ownership by two or more individuals together. It differs from other types of co-ownership in that the surviving joint tenant immediately becomes the owner of the whole property upon the death of the other joint tenant. This is called a Right of Survivorship.
What is Tenancy in Common?
A tenancy in common is another form of co-ownership. It is the ownership of an asset by two or more individuals together, but without the rights of survivorship that are found in a joint tenancy. Thus, upon the death of one co-owner, his or her interest will not pass to the surviving owner or owners but will pass according to his or her will. If there is no will, his or her share will pass according to the law determining heirs.
What are the Advantages of Joint Tenancy?
The primary advantage of joint tenancy is the automatic transfer of ownership upon the death of one of the joint tenants. An asset that is passed from a deceased joint tenant to the surviving joint tenant(s) would not have to pass through the probate estate of the decedent. Therefore, joint tenancy is an efficient method to evade certain probate expenses and tasks. (It should be noted that joint tenancy will not avoid the incurrence of certain federal and state taxes.)
What are the Disadvantages of Joint Tenancy?
Joint tenancy involves the co-ownership of a certain piece of property. There may be a difference of opinion among the co-owners as to the management of the property. Therefore, it may become difficult to perform such tasks as repairs, division of income, and so forth.
Titling property in joint tenancy may also lead to unintended consequences as to who inherits the property upon death. Even though your will leaves your property to certain named individuals, joint tenancy property will go to the surviving co-owner and will not pass based upon the will. A clause in a will which attempts to terminate certain joint tenancy is of no legal effect. Therefore, it is important for titling of assets to be considered as well as will drafting when doing your estate planning.
Is Joint Tenancy a Substitute for a Will?
Joint tenancy does not take the place of a will. It applies to a particular piece of property only. A properly drawn will disposes of all property not held in joint tenancy. A will can be changed as often as you choose. A joint tenancy agreement is difficult to change because one co-owner may simply refuse to do so.
How is Joint Tenancy Created?
Joint tenancy is not established until something is affirmatively done by a party that owns property. State law controls the creation of a joint tenancy in both real and personal property. (Real property is land and attachments to land; personal property is all other kinds of property.)
For transfers of real property to two or more persons, the deed or conveyance must expressly state an intention to create a joint tenancy by noting that the property will be held not as tenants in common but as joint tenants with rights of survivorship. An example may be: To A & B, as joint tenants and not as tenants in common.
For transfers of personal property, such as stock certificates or bank accounts, the intention of the parties is controlling. Where there is a writing, such as a bank signature card, which is clear and unambiguous, the language on this written document will usually control on the issue of intent.
Can One Joint Tenant Sell His or Her Interest in Joint Tenancy Property?
This depends on the agreement between the joint tenants concerning co-ownership. Usually, each joint tenant owns an equal share in the whole property. Thus, if one joint tenant has a buyer for this share and there is no limitation between the joint tenants, then the sale may occur. It is important to note that a severance of the joint tenancy occurs upon a transfer by one of the joint tenants and, upon severance, the co-ownership then changes to tenancy in common (see above).
How Does Joint Tenancy Affect Taxes on the Death of a Joint Tenant?
Upon the death of any person, there are several different types of taxes that may be imposed that may affect joint property. These taxes include federal income tax, federal estate tax, federal gift tax, and Iowa inheritance tax. It should be noted that joint tenancy ownership may result in taxes which might not otherwise be required. Tax laws frequently change. The implications of tax laws should be considered when making the decision concerning the use of joint tenancy. It is therefore important to consult with an attorney concerning these issues.
What Happens to Joint Tenancy Property in the Case of Divorce?
Joint tenancy ownership of property between husband and wife may be divided by the Court in any divorce proceeding the same as other marital property.
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