What is Joint Property Ownership?

couple holding onto a briefcase symbolizing a jointly held asset

There are many different ways to hold property jointly with another person or group of people.

How your jointly held assets are titled carries important consequences for how you can transfer them upon death, and therefore knowing which rules apply to your assets is essential to creating an effective estate plan.

In this article, we review six common ownership models for jointly held assets.

Tenancy in Common

When assets are held as tenancy in common, each joint owner has an individual interest in the asset. Owners may be related or unrelated to one another. The percentage split between joint owners is generally based on their capital contributions in the asset, but the actual percentage can be any amount, resulting in equal or unequal splits, and the owners may have acquired their interest at different or multiple times.

Since each owner has an individual interest, each owner has the right to freely sell, lease, or transfer his or her ownership interest without the consent of the other owners. All owners have an equal right to use or occupy the property during their lifetimes as owners. When a joint owner passes away, that owner’s share transfers based on the deceased owner’s estate plan.

Community Property

Community property assets are held by married couples living in community property states and common law states that permit assets to be held as community property in certain instances. In a community property model, the spouses own the asset 50-50. When the first spouse passes away, that deceased spouse’s one-half share generally passes based on the deceased spouse’s estate plan.

Tenancy by Entirety

Married couples living in certain common law property states can hold assets as tenancy by entirety. The tenancy by entirety model treats both spouses as a single legal entity. Each spouse owns a 50% share in the asset, and neither spouse can sell or transfer their ownership without the other’s consent.

With the exception of tax debts, tenancy by entirety property is typically exempt from creditor judgments against one spouse’s individual debts or liabilities.

When one spouse dies, that deceased spouse’s interest in the property automatically transfers to the surviving spouse through a right of survivorship.

Rights of survivorship

Assets with rights of survivorship have built-in transfer mechanisms. Upon the passing of one of the joint owners, that deceased owner’s interest distributes pro ratably (i.e., proportionally) to the surviving owner or owners.

Example of how right of survivorship works

Suppose three people own an asset in joint tenancy with rights of survivorship. Joint tenancy requires that each owns an equal share, and therefore the ownership split must be 1/3, 1/3, 1/3. If one owner passes away, that owner’s share distributes to the surviving two owners, who will each own ½ shares. Upon the death of the next owner, the last surviving owner will own 100% of the asset.

Community property with right of survivorship is much simpler. Since only married couples (and in some states registered domestic partners) can own community property, the spouses own the asset 50-50. The surviving spouse simply inherits the deceased spouse’s share to own the asset 100% outright.

Multiple party accounts at financial institutions

There are two main types of multiple party accounts at financial institutions:

  1. Joint accounts
  2. Convenience accounts

Joint Accounts

A joint account is an account payable on request to one or more account holders. During the lifetime of the joint account holders, the account belongs to the account holders in proportion to their capital contributions to the account, unless there is clear and convincing evidence of a different intent. Each owner may withdraw funds at any time regardless of the owner’s contribution to the account, however.

Holding a joint account with another person or group of people does not by itself create a right of survivorship. However, most financial institutions have pre-printed forms making such designation simple and easy to do.

Convenience Accounts

A convenience account allows an individual to open up a wholly owned account but name another person on the account to help manage it. This other person acts as the account holder’s agent and can help manage the account holder’s finances. The agent does not gain a current interest in the convenience account, and the account funds do not pass to the agent when the client dies.

How to incorporate jointly held assets in an estate plan

The below table summarizes a few of the principal characteristics of the different joint ownership models during life and how the assets transfer upon death.

Comparison of Joint Ownership Models
Tenancy in Common Joint Tenancy Tenancy by Entirety Community Property Communityh Property WROS*
# of Owners 2+ 2+ 2 2 2
% Ownership Any Equal shares 50-50 50-50 50-50
Freely sell share during life?
Equal usage rights during life?
Ownership transfers via estate plan upon death

*WROS means "With Rights of Survivorship"

You should include jointly held assets without built-in transfer mechanisms into your will or revocable living trust in order to designate one or more beneficiaries to receive the asset upon your death. You have two options:

  1. Specific Gift: You designate your share of the jointly held asset as a specific gift, whereby you specifically identify the jointly held asset in your will or revocable living trust and one or more beneficiaries to receive it
  2. Remainder or Residuary Gift: You do not identify the asset as a specific gift in your will or revocable living trust, and instead the asset passes to the one or more beneficiaries of your residuary estate or remainder provisions of your trust.

Jointly held assets with built-in transfer mechanisms, such as a right of survivorship, pass outside of the estate plan and directly to the surviving owner(s). You should note the existence of these assets when creating your estate plan, but you won’t include them in your actual will or revocable living trust instrument.

For individuals who wish to leave everything to a spouse or other loved one outright, utilizing built-in transfer mechanisms can be a very cost effective and efficient estate planning approach. In most cases, all you need to complete the asset transfer is an original death certificate. As long as you are comfortable with the considerations for utilizing built-in transfer mechanisms outside of a will or trust, this is a great way to transfer assets upon death.

Summary

Creating a comprehensive estate plan requires knowing how your jointly held assets are titled and the implications of this titling on transferring the assets upon death.

When you create your estate plan with Just In Case Estates, our step-by-step questionnaire guides you through this process so that you can be sure your assets transfer correctly and without conflict. If you have any questions along the way, our live customer support team is available via phone, text, email, and live chat.