What Happens to Jointly Owned Property When an Owner Dies?
Various types of property, such as bank accounts and real estate, can be owned jointly with another person or persons. When property is jointly owned, it may pass automatically to the other owner without going through probate.
How Wills Apply to Jointly Owned Property
Your will only governs assets held solely in your name without a designated beneficiary. For example, if you have a joint checking account with another person, that account automatically becomes the property of the surviving owner upon your death. This transfer occurs outside of probate, meaning any directions in your will do not apply to jointly owned accounts.
Real estate is the most commonly jointly owned property, and there are several different ways to hold it, each with its own legal implications.
Types of Joint Property Ownership
Joint Tenancy or Joint Tenancy with Rights of Survivorship
When one joint owner dies, their share automatically passes to the surviving joint owner. This arrangement avoids probate, which can be costly and time-consuming, potentially taking months to complete.
Tenancy by the Entirety
This ownership type is available only in certain states and is not permitted in Texas. Similar to Joint Tenancy, when the first spouse passes away, their interest automatically transfers to the surviving spouse outside probate.
Tenancy by the Entirety provides additional protections. One spouse cannot mortgage or sell the property without the other spouse’s consent, and creditors of one spouse cannot place a lien or enforce a judgment against property held this way.
Tenancy in Common
This ownership form has no right of survivorship. Each owner’s share passes to their chosen beneficiary upon death. Tenants in Common may hold unequal interests in the property. When one owner dies, their beneficiaries inherit their share and become co-owners with remaining Tenants in Common.
A Tenant in Common’s share passes according to that person’s will (assuming one exists). The decedent’s executor must then probate the will and file a petition with the court. However, if a Tenant in Common’s share is held in trust, probate can be avoided—the trust terms, rather than the will, determine how the property passes at death, eliminating the need for court involvement.
Tax Considerations
Capital gains consequences may occur when transferring ownership interests during life or after death. Such gifts should never be made without consulting an estate planning attorney.
A common error occurs when a testator fails to account for different ownership types and how assets pass through their will. A comprehensive estate plan created by an experienced estate planning attorney ensures that both probate and non-probate assets work together cohesively.
If you or a loved one needs assistance with elder law, probate or estate planning issues, do not hesitate to book a call with us today. We are here to help.
