Joint Ownership means that you own property together with one or more other persons. Because these kinds of assets are not in your name alone, the distribution after your death is usually not controlled by your Last Will and Testament or your Trust, but instead by operation of law. This means that, upon your death, these assets will instantly and automatically belong to the other person or persons who jointly own them with you.
There are three ways that two or more people may own one property at the same time:
1. Joint Tenants with Rights of Survivorship
2. Tenants by the Entirety
3. Tenants in Common
Joint Tenants with Rights of Survivorship is the form of joint ownership which specifies that when one owner dies, the surviving owner or owners automatically receive the deceased owner’s share. For example, a mother may decide to add her daughter to her bank account and designate ownership as Joint Tenants with Rights of Survivorship. While the mother is alive, both mother and daughter own the account equally and either may transact business alone. If mother passes away, the bank account remains owned only by the daughter.
Tenants by the Entirety is a form of ownership available in Virginia only to married couples. Tenancy by the Entirety means that each owner has an undivided interest in the whole asset. Neither owner may sell, transfer, or encumber the asset alone. This form of ownership requires the signature of all the owners to sell or gift. Traditionally, husbands and wives own property jointly in this manner, particularly real estate. One very useful characteristic of tenancy by the entirety is that if one of the co-owners loses a civil lawsuit resulting in a judgment against him, property held as a tenancy by the entirety is not available to the judgment creditor. By statute, Virginia law also allows ownership of personal property, for example, bank accounts, as a tenancy by the entirety. When one spouse dies, the other spouse becomes the sole owner of the property, without the need to go through probate.
The third method for multiple persons to co-own property is Tenancy in Common. Property held as Tenants in Common ARE controlled by each co-owner’s Last Will or Testament. This form of joint ownership means that when one owner dies, his/her share of the joint asset will remain a part of his/her estate and be distributed under his/her Estate Plan.
There can be advantages to the joint ownership of an asset. Titling an asset using one of the above forms of joint ownership may allow one person to help another handle their financial affairs. Using the example above of the mother and daughter, daughter can go to the bank and handle all of her mother’s banking, perhaps if the mother is not up to doing so. Also, the joint bank account will not go through the court process of probate upon mother’s death.
However, there may also be many disadvantages to joint ownership. Using our same example, while mother believes that she can trust her daughter, if the account is jointly in daughter’s name, the account is presumed to belong just as much to the daughter as her mother. Unfortunately, some take advantage of this and may use the funds for personal items that mother did not intend. Also, mother’s bank account is now exposed to the claims of her daughter’s creditors, be them credit card companies or even the IRS. And, while mother may have instructed her daughter give one-half of the money in the account to her brother upon mother’s death, daughter is under no legal obligation to do so. Instead, she could decide to disregard mother’s instructions and her moral obligation to follow mother’s wishes and retain all of the money for herself.
If you have any questions regarding joint ownership, please contact us. Every person’s situation is different. Our experienced attorneys can assist you and advise you about what form of ownership is best for you.