What is a Joint Tenancy?

Joint tenancy is a form of ownership by two or more individuals together. It differs from other types of co-ownership in that the surviving joint tenant immediately becomes the owner of the whole property upon the death of the other joint tenant. This is called a "right of survivorship." Joint ownership has rather rigid legal limitations and consequences that are sometimes not intended.

A joint tenancy between a husband and wife is generally known as a tenancy by the entirety. Tenancy by the entirety has some characteristics different than other joint tenancies, such as the inability of one joint tenant to sever the ownership and differences in tax treatment.

What is a Tenancy in Common?

A tenancy in common is another form of co-ownership. It is the ownership of an asset by two or more individuals together, but without the rights of survivorship that are found in a joint tenancy. Thus, on the death of one co-owner, his or her interest will not pass to the surviving owner or owners but will pass according to his or her will or, if there is no will, by the law determining heirs.

How is a Joint Tenancy Created, and What Property Can Be So Held?

State law controls the creation of a joint tenancy in both real and personal property (real property is land and attachments to the land, personal property is generally all other types of property). For transfers to two or more persons who are not husband and wife, the deed or conveyance must expressly state an intention to create a joint tenancy by noting that the property will be held not as tenants in common but as joint tenants with rights of survivorship. For transfers of personal property, such as stock certificates, the simple letters "JTWRS" may be used to designate a joint tenancy.

A joint tenancy can be created in almost any type of property. Different types of jointly held property have different characteristics. Either joint tenant of a bank account usually may withdraw the whole amount on deposit, depending upon the way the account agreement is written. The signatures of all joint tenants are generally required in order to transfer or sell bonds and corporate stocks. All joint tenants, and their spouses, must sign deeds and contracts to transfer or sell real estate.

Is a Joint Tenancy an Adequate Substitute for a Will?

No! Only with a will can a person be certain that his or her assets will pass as intended. A will, properly written and executed, applies to all of the property of the maker for which he or she has not otherwise provided. Almost everyone should have a will, even though he or she has provided for property to pass by joint tenancy, beneficiary designation (as with life insurance, POD and TOD designations) or by a trust.

A joint tenancy is not a "catch-all," and applies only to the specific property described in the instrument creating the joint tenancy. Furthermore, while a joint tenancy does provide for survivorship upon the death of one of the joint tenants, no provisions are included for the disposition of the property upon the death of the survivor. In addition, the joint tenant who is intended to be the survivor may die first, frustrating the intent of the parties. A properly made will would attend to these and many other of life's uncertainties.

A joint tenancy is a present transfer of an actual interest in the property. Except for joint bank accounts, it cannot be revoked or reversed without the joint tenant's cooperation, and for real property the cooperation of the joint tenant's spouse is also required. Creating a joint tenancy with someone other than your spouse may result in a gift tax liability.

A will is revocable and may be changed as circumstances changes. It is the cornerstone of an effective estate plan.

Will a Joint Tenancy Avoid Probate Expenses?

To some extent, joint holdings will reduce probate involvement and expense. However, while joint assets will avoid the formal estate administration that is required when property passes under a will, other costs may well arise. Steps must be taken to reregister the assets in the survivor's name and to comply with the various state and federal tax requirements. The process is not as quick and easy, nor as inexpensive, as one might think. In addition, placing assets in joint names with another, especially someone other than a spouse, creates uncertainties and subjects the assets to the disadvantages discussed below.

What are Some Advantages of Joint Tenancy?

Some of the advantages are:

Convenience at the time of death of the first joint tenant to die may result, because property passes to the survivor without the need for probate administration. Generally, only a death certificate is needed to further deal with the property.

Where an estate is of moderate size, and the first to die wishes all of his or her property to pass outright to a surviving spouse, joint ownership may afford a convenient and economical way to pass title to the particular property so owned.

It may be advantageous for a summer home located in another state to be owned in joint names with the right of survivorship. This way, upon the death of either joint tenant, the survivor will own the home outright and the need for probate administration in the other state will be avoided.

The family residence is often held in joint names, especially where the surviving spouse is likely to continue to use the property as his or her home. In that case, joint ownership may be an appropriate method of ensuring continuity of ownership.

A joint household checking or savings account can offer a married couple both convenience and flexibility, as it makes funds immediately available in the event one spouse dies or becomes incapacitated.

What are Some Disadvantages of Joint Tenancy?

A few, but not all, of the disadvantages, are:

The one who originally owned property, and subsequently places it in a joint tenancy, is no longer the sole owner.

If the original owner later desires to dispose of the property, in many cases he or she can sell only his or her part interest unless the other joint tenants agree and cooperate.

If both joint owners die in a common accident or disaster, and it cannot be determined who died first, serious legal problems and an increase in the cost of probate may result.

If a conservator (formerly called a guardian) is appointed for the original owner, the probate court's authority may be required to use the asset for that owner, increasing the cost of the conservatorship.

If minors or legally disabled adults are involved, costly and cumbersome conservatorship proceedings may be necessary.

An always present danger in joint tenancy arrangements is that the co-owners may disagree or quarrel. If the co-owners do disagree, a costly and time consuming law suit may be required for the original owner to exercise his or her intentions for the asset.

If an asset is owned prior to marriage, the original owner may lose part of the asset in a divorce.

A jointly owned asset will be subject to judgments against every owner and may be lost in the bankruptcy of any owner.

The financial management advantages of trusts are eliminated, especially where aged parents or minor children are involved, as are the possible tax-savings features of trusts and estates.

Assets may not be available to the executor of a deceased joint owner's estate. In such a situation it may then be necessary to sell other assets, possibly at a sacrifice, in order to meet tax payments or other cash needs to settle the affairs of the deceased.

What Tax Consequences Could Result From the Creation of a Joint Tenancy?

Serious tax disadvantages may result from the use of a joint tenancy. If all the property owned at death, including joint property, life insurance and employee benefits, exceeds $600,000, the estate will be subject to federal and state estate taxes. Estate taxes are not avoided by joint tenancy. In many instances, all or part of jointly held property may be taxable in the estate of the first joint tenant to die.

An asset owned jointly may retain part of its original cost basis. Upon the sale of the asset after the death of one owner, the income taxes may be significantly increased.

Joint tenancy may also result in a gift tax. While recent changes in federal tax laws have to a large extent minimized the gift tax consequences of joint ownership, especially between spouses, effective tax planning for large estates can be greatly complicated by the use of joint property arrangements.

May Safe Deposit Boxes be Jointly Held?

Under Missouri statutes, safe deposit boxes may be jointly rented. This type of registration must be specifically noted in the rental agreement with the bank or safe deposit box company. With a jointly rented safe deposit box, the surviving joint tenant will have immediate access to the box upon the death of the other joint tenant. However, even though a safe deposit box is rented in joint names, that alone does not mean that all of the assets contained in the box are also jointly owned. Also, joint ownership of a safe deposit box may complicate matters rather than making them simpler.

Should I Use a Joint Account for Help in Writing Checks?

No. Some people will place a child or someone else on a checking account as a joint tenant to help them write checks to assure that bills are paid in the event the original owner is unable to do so. Upon the original owner's death, the entire account will belong to the other person; other heirs will not share in it. Oral understandings about what is to be done with the account balance upon death are frequently misunderstood and often forgotten. Furthermore, the surviving joint tenant may be subject to gift tax liability if he or she attempts to share the funds in the account with other intended heirs after the original owner's death. Anyone with a concern or needing help in this area should see their lawyer about a durable power of attorney or place a trusted person on the account as "agent."

Alternatives to Joint Tenancy Which Also Avoid Probate

Missouri's relatively new Pay On Death ("POD"), Transfer On Death ("TOD") and Beneficiary Deed statutes now provide for the disposition of certain types of property at the time of death without probate proceedings and without some of the disadvantages of joint tenancies. Under these statutes, the persons who are to receive the property on the death of the original owner may be designated as beneficiaries for certain accounts in financial institutions, securities, real estate and other instruments of title.

POD and TOD beneficiary designations and beneficiary deeds are revocable by the owner, the account or property passes outside of probate and consent of the beneficiary to mortgage or sell the property is not required. As no present interest is transferred, no gift tax liability is incurred. The arrangement is preferable to joint tenancy in these respects. However, these designations are subject to some other of the same disadvantages as jointly owned property; they are not intended to be an adequate substitute for a will since succession amongst intended beneficiaries usually cannot be adequately described. One should not open POD accounts or execute transfer on death instructions or beneficiary deeds without first consulting an attorney whose practice includes estate planning.

How Can I Tell Whether or Not a Joint Tenancy is Advisable for Me?

Your lawyer can advise you after he or she has been made aware of all of the facts concerning both your property and your family situation. The cost of such advice is usually quite small compared to the savings that may result and the pitfalls that can be avoided. Due to recent changes in the tax laws, the need for legal counsel is even more essential in estate planning.

Your lawyer can help you determine what property should be owned as joint tenants or as tenants by the entireties, when POD or TOD beneficiary designations might be useful for specific gifts to children and grandchildren, when a trust might be an appropriate part of your estate plan and what property should pass under a will and be administered in your estate. If a gift to a minor is involved, your lawyer also can tell you about the Missouri Transfers to Minors Law.


The Missouri Bar, P.O. Box 119, Jefferson City, MO 65102-0119