Joint Tenancy is a form of property ownership in which one person and another person own and control property together.
With equally shared ownership, this means that by law the property passes outside of a joint tenant’s estate when they die. Instead, their share of the property will go to the other owner. This type of property ownership is often used with married couples and business owners. Under the proper circumstances, joint tenancy helps the co-owner by keeping the property outside of the probate process.
Probate is the court process where you have to prove the validity of a will after a person has passed away. Furthermore, beneficiaries of a will must prove that they’re entitled to inherit. Avoiding probate is often ideal because the process can be lengthy and expensive.
Joint tenancy helps you avoid probate because of its rights of survivorship clause. A joint tenant strategy is a frequently used probate avoidance strategy for joint owners of property. Properties usually held in joint tenancy include homes and real estate, cars, boats, and bank accounts. With regards to joint tenancy in Virginia, all owners must control equal shares of the property. This means that all revenue made from the property, its value, and possible losses are shared equally amongst them. If not, then it will be considered tenancy in common instead of joint tenancy.
To get a better understanding of joint tenant ownership, we should take a look at the different types of joint tenancy options:
Joint Tenancy Safe Deposit Boxes
If you’re looking for a joint tenancy option where you can co-own and have access to things you put and store away, a joint tenancy safe deposit box is a good option. With this, you’ll be able to keep important documents such as wills, estate and funeral instructions. You can also keep important materials there as well such as family jewelry that you would like to pass down to future generations.
It should be noted that you should only choose this option if you plan on making sure the safe can be unsealed after one of you passes away.
Joint Tenancy Bank Accounts
If you have a family and you would like to share an account with your spouse, you have the option of creating a joint tenancy bank account. With this, you would go to your bank, create an account and sign the documents under Joint Tenancy With Rights of Survivorship (JTWROS). As with property, all money in the account will transfer to the surviving owner when the other passes away.
As with all things in life there are advantages and disadvantages! Here are two advantages:
Right of Survivorship Clause
The right of survivorship clause in joint tenancy helps determine what will happen to property that is owned by two or more people when one of them passes away. Moreover, it’s a specified contract that details what property is being co-owned, specifies equal share between all owners, and instructs that the property should pass down to the surviving co-owners.
Because of this, you won’t have to prove your case in court because the contract states it already.
This Technique is Simple and Reliable!
Setting up joint tenancy ownership is fairly simple. Married couples often own property in a joint tenancy in Virginia. Joint tenancy helps if death is imminent and you don’t have an estate plan in place.
For example, let’s say you’ve recently learned you have cancer and don’t believe you will be able to survive the illness. You can leave your home or any property in joint tenancy to your surviving children or spouse. By doing so, you save time and probate proceedings in the process.
There are disadvantages to this approach as well, such as:
Federal Estate Taxes
If you own property by way of joint tenancy with someone you’re not married to, you’ll have to deal with the possibility of the property’s value being taxed twice. For example, you and your best friend decide to own a boat house. Moreover, both of you paid for the property and paid the mortgage off equally as well. Let’s say your friend passes away and you have no proof of your payments.
Because of this, the house’s market value will be included in their taxable estate when they pass away as a result of the IRS assuming they paid for everything. Since you’d be the surviving joint tenant, you’ll fully own the property meaning that the home’s market value will be included in your's as well when you pass.
Consequences of Joint Tenancy Rules
Because of joint tenancy rules, you may face possible issues down the line with your other owner. For example, if your co-owner has any debts that haven’t been paid, their creditors may attempt to force you to sell previously-shared property.
This can potentially get worse if the owner dies and leaves you to deal with the creditors. Depending on how large the debt is, you could potentially lose the property, especially if the late owner listed the property as a form of loan security.
Another potential consequence is that, because of shared ownership, your access to a given property or account may be limited. For example, if you would like to transfer or withdraw money out of an account, you must adhere to any rules you created with your co-owner.
Because of these rules, and other quirks of joint tenancy ownership, make sure whomever you’re deciding to own property in joint tenancy with is someone you trust will make decisions that won’t hurt you in the end.
In conclusion, if you’re married or in business looking to co-own property such as stocks, bank accounts or real estate, joint tenancy in Virginia is certainly a solid option. Because of its simple probate avoidance, joint tenancy is a popular ownership strategy to use in your estate plan.
Now that you’ve read this guide, schedule a consultation with us to discuss how joint tenancy ownership can be used in your estate plan!