Other than marriage there are two ways in which two or more people can own a property: tenancy in common and joint tenants. Under tenancy in common each owner holds undivided interest in property and the interest of each tenant does not terminate upon death, rather it is passed to their estate or heirs. The estate or heir own a percentage of interest in the property which can be severed, portioned, or sold.
Joint tenants, however, share one and the same interest in property. Upon the death of one tenant the right of survivorship comes into effect granting the surviving tenant sole ownership of the property. As this property is therefore not included in estate valuations, joint tenancy is often used to simplify estate management, minimize probate fees, and ensure property passed to the intended person. For assets other than property the law assumes that anything held in two or more names is owned as a joint tenancy unless otherwise stated. For land this is reversed: the law assumes multiple parties are tenants in common unless otherwise stated.
Joint ownership can be applied to a variety of assets including:
- Houses or property;
- Bank or financial accounts;
- Insurance policies;
- Other financial assets; and
Once a name is added to the title of a property they cannot be removed without their consent. This factor can lead to a loss of control of property. Property and assets held under joint ownership are also subject to claims from all tenant’s creditors and there may be tax considerations involved as well. If the joint tenant does not reside at the shared address it may result in the loss of principal home status which will result in extra taxes. Also, parents who add their children to the title for their homes may be required to pay taxes even if they did not receive payment. Joint tenancy is often not recommended due to the potential for fraud or embezzlement but it can be used to great effect in estate management. As with any financial arrangement, be sure you really know your co-tenant before entering into a joint tenancy agreement with them and be prepared for potential unpleasant surprises along the way!