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March 28, 2001: Titling Property in Joint Tenancy vs. Tenants in Common

Q: What is the difference between holding property in joint tenancy and holding property in tenants in common?

A. In Colorado if, for example, two names are on title and nothing else is indicated, (whether deeds, cars, stocks, etc.), the asset is held in tenants in common. That means each person owns an "undivided" half interest in the asset. If one owner dies, his or her half interest will pass under a Will or by the intestate (no will) laws to the designated beneficiary thereunder. The deceased's share of the asset would not automatically go to the other person on title.

But if the asset is held in joint tenancy (the actual term is held in joint tenancy with the right of survivorship or JTWROS), then upon the death of one, the deceased's share automatically vest in the other title owner. The Will or the intestate laws have no control, even if that asset was described in the Will and specifically left to another beneficiary.

Joint tenancy must be specifically indicated, otherwise the asset is held in tenants in common. Several of the more common ways to identify ownership are the use in the document of the terms "joint tenants" or joint tenants with right of survivorship, or "JTWROS." If these terms do not appear in the document, then the use of the conjunction "or" does the same thing. (Avoid the term "and/or.") Anything else probably signifies tenants in common. But even here the rules get fuzzy because banks may treat, for example, accounts and CD's as held in joint tenants, even tough the traditional guide words are lacking.

So the bottom line is have your attorney look to be certain of the status of the ownership.

But what's the big deal about all this legal mumbo jumbo? Assets held in joint tenancy do not have to be probated upon the death of one of the title holders. And even though "probate" in Colorado is normally a quick, inexpensive, easy, and efficient process, if we can avoid it, then we should do so.

To pass title under joint tenancy, a death certificate just needs to be recorded or presented along with the required paperwork to transferred title. No Court involvement is needed.

Thus the general rule of thumb is that a married couple should hold everything in joint tenancy, unless they have a tax will or unless there is a personal or legal reason not to do so.

But it probably is not a good idea for others to hold property in joint tenancy (such as a parent and children) if the only reason is to avoid probate.

First the act of adding a name constitutes a gift which may trigger gift taxes. But then afterwards as title holder, the new "owner" could force a sale of the asset, or his or her creditors could attach that person's share, or it could be part of a divorce. Additionally, there is no step-up in basis on the part of the asset in the survivor's name so capital gains will be higher than if the person inherited that same property. And finally if one of the children in fact dies first, title goes to the other people on the document, and the deceased's descendants will inherit nothing. I can go on but I think you get the picture.

Many will say if you have everything in joint tenancy you do not need a Will. But consider if both of you may die in a common accident. And of course the survivor would need a Will anyway but may not have time to do one or just forgets. And even if you think everything is held in joint tenancy, maybe something is not. The Will is a safety net to insure that the property title passes on properly.

While I hope none of you suffered whiplash in our warp speed tour through joint tenancy/tenants in common land. But this is a very important but fundamental building block in each of our legal lives and needs not only to be considered, but understood.

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