You will find it very common for spouses to own property together in San Antonio as joint tenants with right of survivorship (JTWROS}. When one passes, the other owns the property outright. It’s simple, easy, and automatic. But ownership gets messy in the case of a non-spouse as joint owner. Splitting the property gets messy depending on how the deed is registered. What can we learn about the difference between JTWROS and JT?
Once you co-own an asset with another individual, you can still have an agreement known as “joint tenants with right of survivorship.” When one of the owners passes away, the surviving owner automatically becomes sole owner of the property.
Here’s where it gets sticky: you may have a will that says your half of a vacation cabin should be split between the kids. However, if you hold the property jointly with a friend or a relative, contrary to your wishes, you will lose control of the property. Then the entire ownership goes to the joint tenant. The vacation cabin you bought with your brother for your kids to enjoy through their life now on your death becomes your brother’s, Joint tenancy supersedes a will.
The Difference Between JTWROS and JT
Your brother has the ability to sell his interest in the cabin without your knowledge or approval.
- You will find it very challenging to remove a co-owner from the property title without full cooperation from him or her.
- Another danger of jointly held property is the exposure of the asset to the creditors’ claims of both owners. Suppose your brother, the joint tenant of the cabin, gets into financial difficulties. His ownership in the cabin may be claimed by a creditor or forced to be sold to pay off debts.
- By adding a non-spouse person to the title of an asset, you are making a gift to the new joint owner. Depending on the current value of the property being gifted, you may have an IRS liablility so far as gift taxes.
The negatives of holding joint title with a non-spouse many times outweigh the positives. Loss of control of the property, becoming subject to the co-owner’s creditors, and potentially higher taxes can have negative consequences. We cannot overstate the importance of proper property ownership to your overall financial planning, be sure to discuss these issues with a qualified advisor before taking action.
There Exists Another Way
There exists another way to own property jointly. Choose tenants in common. Joint tenants with right of survivorship and tenancy in common have different rules. With tenancy in common, the death of one of the parties shall have the effect of transferring the rights of the decedent to the decedent’s heirs. In other words. If the brother owned the cabin as tenants in common, the kids would still inherit the father’s half.
Make sure if you are investing with a non-spouse, you record the title to protect your interests should you meet an untimely end.
We are Strategic Alliance your partner in real estate investing. We team with, empower, and enable aspiring and serial entrepreneurs to take the next step or escape W-2 employment through business ownership, financial literacy, and real estate investing.
Strategic Alliance focuses on helping veterans, first responders, and real estate professionals develop passive income on their way to financial freedom. Changes in the real estate industry due to online tools such as Zillow, Facebook, and other informational giants, forces us to evolve or be left behind.