“Joint tenancy is an arrangement that allows beneficiaries to access your account, without having to go to court.”
Investopedia’s recent article, “Joint Tenancy: Benefits and Pitfalls,” explains that it’s a common practice for couples and business partners to take title to each other's bank accounts, brokerage accounts, real estate and/or personal property, as joint tenants with rights of survivorship (JTWROS).
JTWROS is a type of account or title, where the asset is owned by at least two people and all tenants have an equal right to the account's assets.
They all also have survivorship rights, in the event of the death of another tenant. Therefore, when one partner or spouse dies, the other receives full title to the asset. Let’s take a closer look at JTWROS.
When a person passes away, his will is examined by the probate court. The court will decide whether the will is valid and binding and determines if there are any outstanding liabilities and assets of the deceased. After addressing any debts, any remaining assets are distributed to the heirs, according to the instructions in the will. However, if a person dies without a will, the probate court will divide the assets pursuant to state intestacy law.
Because JTWROS automatically transfers ownership to the surviving spouse or business partner at the death of the first partner, there is no probate for this asset. When a married couple or two business partners own an asset that is titled JTRWOS, both are responsible for it, so both enjoy its positive attributes and share liabilities equally. However, neither party can incur a debt on the property without indebting themselves.
When the surviving spouse or business partner assumes control over the asset titled JTWROS at the death of the co-tenant, she can sell it, or give it away.
The alternative to JTWROS is a tenancy in common. With that form of ownership, each owner may own half of the asset, or a percentage or fractional ownership can be established. Each party can also legally sell his share, without the other party's consent. Second, the asset will pass to heirs.
Both JTWROS and tenancy in common have some nice benefits. However, before you set up either, every party should assess their situations, to determine whether one option is better than the other.
Reference: Investopedia (May 28, 2019) “Joint Tenancy: Benefits and Pitfalls”