Joint Tenancy

Joint tenancy is a legal arrangement in which two or more people own a property together, each with equal rights and obligations. When one of the owners in a joint tenancy dies, that owner's interest in the property passes to the survivors without the property having to go through probate.

Joint tenancy is most closely associated with real estate ownership, but the larger legal concept of joint tenancy with right of survivorship can apply to a range of assets, including businesses and brokerage accounts. The strong association with real estate exists because the term tenancy is seen as synonymous with owning or living in a home.

Joint tenancy is entered into by the joint tenants at the same time, usually through a deed. For example, an unmarried couple purchases a house. At the time of purchase, the real estate agent asks the couple how they want to own the home. If they opt for joint tenancy, the deed to the property will then name the two owners as joint tenants. Then, if one person dies, the other person will automatically become the full owner of the property.

Joint tenancy has a number of positive factors going for it. As mentioned, as long as one joint tenant survives, it delays most of the headaches of clearing the property through an estate via a will. This means the survivor has immediate access to the property and can tap any equity in it if that is needed, as may be the case if half of a couple suddenly passes. All the parties in a joint tenancy also share responsibility for the property, meaning that half of a couple can’t take out a loan on the property and then leave their partner accountable. Any debt or equity in the property applies equally to all parties.

The disadvantages of joint tenancy usually appear in the handling of the asset upon the death of one or more of the joint tenants. Joint tenancy gives all the rights to the survivor, so even if the deceased was hoping to pass the value of the property to designated heirs, there is no legal obligation for the survivor to do so. To avoid losing control of the disposition of the property upon death, some joint owners opt for tenancy in common instead. Tenancy in common allows for percentage-based ownership, and shares can be traded and tenants added throughout the life of the arrangement rather than just at inception.