The Problem with Joint Property
Could joint tenancy, one of the most common forms of holding title to assets, lead to an estate planning disaster for your heirs? Joint tenancy, often called “joint tenants with right of survivorship,” is a form of holding equal interests in an asset by two or more persons. If one joint tenant dies, his or her share generally passes automatically to the other joint tenant(s) by right of survivorship.
Advantages Of Joint Tenancy
- Probate avoidance: Title to assets held in joint tenancy passes automatically at the death of one joint tenant to the others. There is no need for a formal probate (unless all the joint tenants die).
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- Loss of control: Your will (or trust) will have no effect on joint tenancy assets, even if you change your mind as to the persons you would like to receive your share when you die. Also, the entire asset may be available to the creditors of either joint tenant.
- Assets may not reach your children: Quite often assets passing to a surviving joint tenant spouse end up in joint tenancy with a new spouse. The new spouse may ultimately receive all of the assets rather than your children. Also, if the first joint tenant to die had children of a prior marriage, they can be easily cut out of any inheritance by the surviving joint tenant.
- Potential tax penalties:
- Gift tax penalty: The creation of a joint tenancy in some assets may be subject to gift taxation if the value exceeds the $12,000 annual gift tax exclusion. Gifts to one's spouse are generally not taxable.
- Estate tax penalty: A “credit shelter” or “bypass” trust is often used to reduce or eliminate estate taxes for the children or other beneficiaries of a married couple with assets in excess of $2 million. Holding assets in joint tenancy can prevent this type of trust from being effective by passing assets outside the trust.
- Income tax penalty: When appreciated assets are sold, capital gains tax is generally paid on the difference between the cost basis and the sales price. Assets included in one's estate receive a new, stepped-up cost basis at the time of death - the value at which the assets are included in the decedent's estate. If these assets are then sold at this higher value, there is no gain, and thus no income tax due. However, assets held in joint tenancy title receive only a partial step-up in basis, on the decedent's share. If the decedent owns the asset alone, the basis of the entire asset will be stepped-up.
Dissolving An Unwanted Joint Tenancy
Because of the many disadvantages of joint property, it is often advisable to terminate such ownership in favor of sole ownership or tenant in common ownership. For bank and brokerage accounts, this involves changing the title of the account and signing new signature cards or similar documents. Dissolving a joint tenancy in real property is generally done by creating a new deed by which the joint tenants transfer their interests to themselves as tenants in common.
However, changing of title to assets can have very serious tax and legal consequences and should be undertaken only after seeking professional advice.
Mr. Giddens, in North Carolina does the deed to real esate have to say "with rights of survivorship"? Or does "Joint Tenants" suffice. Your help would be greatly appreicated.
Thanks. JC
ANSWER: The deed must contain the language "joint tenants with right of survivorship."
in north carolina is tenants by the entirety only available for real property between husband and wife. Can a financial account in n.c. also be titled joint tenants by entirety? thank you. michael.
ANSWER: In North Carolina, tenants by the entirety is only available for real property owned by a married couple.
If a jointly owned and shared home passes from one joint owner to another due to the death of one, is the second joint owner liable for income tax on the value of the partner's half?
ANSWER: No, but in estates over $2 million estate tax could be due.
My husband owns property with his adult daughter from his 1st marriage. He does not have a will, upon his death do I have any right to a portion of the property?
ANSWER: Assuming you are referring to real property, it depends on whether the property is owned as joint tenants with right of survivorship or tenants in common. If the latter, you will be entitled to a portion of the property upon your husband's death. If you cannot determine how the property is is owned, you will need to consult with an attorney.
Husband and wife own resident in the entirety. They purchase residence for $220,000.00. 10 years later husband dies and resident passes to wife automatically outside of estate.
At death the residence FMV is $400,000.00. Wife sells the house a year later for $420,000.00.
Which basis does wife use? $220,000 or $400,000?
ANSWER: Assuming it's a separate property state like NC, neither. The basis is $310,000 (1/2 of the original basis - plus 1/2 the FMV at Husband's death)
If an unmarried couple own real estate as tenants in common and one person had put down a larger amount as the down payment and agreed verbally to a a 50% split can they then claim a higher percentage of ownership and profits when sold?
RESPONSE: There is not a quick and easy answer to your question - I suggest that you consult with an attorney.
My brother, sister and I were gifted my mothers house. she passed. I've been living here for 15 yrs and took care of her, her last to years of life. I have a lot of property in the house and all utlities are in my name. Do I have any rights to tell them they can't come in to the house whenever they want. Is it not my domicile?
RESPONSE: Generally co-owners of real property have equal rights to occupy the property. I suggest that you consult with an attorney to determine your specific rights.
What happens if the beneficiaries of an estate in North Carolina don't sign a final receipt (or cash a final payment) for distribution of assets? Does the estate remain open?
RESPONSE: The Clerk of Court will not approve a final account to close the estate without a signed receipt. If the beneficiary refuses to sign, his or her share can be deposited with the Clerk.
Also if a will is from another state is it valid in North Carolina?
RESPONSE: Generally yes, but it may be difficult to have it admitted to probate unless it has a self-proving affidavit valid under North Carolina law.
My wife has joint tenants with right of survivorship with her mother on three properties,her main house and two rentals and a few CD's do these go to probate and are they subect to any taxs,We live in NC
RESPONSE: Assets that owned jointly with right of survivorship do not pass through probate at the death of the first owner to die. The assets are subject to estate tax only if the total assets of the decedent exceed the federal estate tax exemption (currently $3.5 million).
My husband and his brother were deeded a farm as joint tenants (does not have right of suvoriorship in deed), was created in 1993. His brother passed away and we are trying to figure out if his brother's part will pass to his wife and children or go to my husband. They were deeded the farm by their uncle. Please advise as NC's law are a little confusing on this matter
RESPONSE: If the deed does not say that there is right of survivorship, then your brother-in-law's portion will pass to his next of kin (if he has no will). However, I suggest you have a lawyer review the deed to give you a definitive answer.
My mom and dad were given 14 acres of land and it was deeded to husband and wife. they divorced 20 years later, and now my mom has passed. I am executor of her estate. Does her half fall to me, or does my dad and his current wife own it all?
RESPONSE: When a couple divorces, real property they own becomes "tenants in common." This means that when one owner dies, his or her one-half interest passes to his or her heirs or in accordance with a last will and testament.
thanks for this post..really helpful..especially to married couples..
My brother-in-law passed away, he and my husband are joint owners to their parents house and land. Does my brother-in-law's wife and children get a part of this property? Or does the property transfere to my husband? The deed states, successors, suvoriorship, heirs of said parties. The state we live in is North Carolina.
RESPONSE: You description of what the deed says does not make sense to me. If the deed says joint tenants with right of survivorship, then the property now belongs to your husband. I recommend that your husband have an attorney review the deed to give him a definitive answer.
My ex-mother in law and I are listed on the deed of a home under grantees. There is no other language. Does this mean we are joint owners and in the case of death of one of us it passes to the other?"
RESPONSE: No. Unless the deed says "Joint Tenants with Right of Survivorship," you are tenants in common. This means that ownership does not automatically pass to the other owner.
My mother died in March of this year. I am the executrix. She lived in NC, do I. Her will simply stated that her assests were to be divided by her 4 children equally (myself - & 2 brother in CA & a sister in NY). If we all agree, can one of my brothers & I say we want our distribution to be in real property (condo) and the other 2 siblings receive their distribution in her other assets? We all agree & each distribution would equal 25% of total estate (cash, FMV of property & IRA's). Or do we each need to take 25% of each asset? Also, according to SECU we would have to have formal closing.... this seems wrong to me if we all agree on the distribution?
RESPONSE: There are gift tax, income tax, and other legal issues involved in this matter. I recommend that you consult with a probate attorney to determine the best way to proceed.
I cosigned a note to refinance a house in Florida as part of a business investment. The business LLC has failed, and the bank is now asking me as the cosigner to pay on the note. The house is now listed for short sale, but I am concerned that Florida law allows banks recourse to still pursue me after the short sale for any remaining deficiency.
My NC house, savings,money market and checking accounts are listed as joint accounts with my wife who did not participate in the investment and did not cosign the note on the house. Are these assets and accounts protected as 'tenant by entiriety' according to NC law, or will the bank in Florida have access to these accounts if they choose to pursue recourse?
RESPONSE: North Carolina does not provide for tenancy by the entirety ownership of personal property, only real property.
My relative passed away recently & I am on the deed to a property held as "Joint Tenants with Rights of Survivorship". How do I go about taking title to the property in my name only?
RESPONSE: It depends on where the decedent lived and where the property is located. It may be necessary to file a death certificate in the county in which the property is located. I recommend that you consult with an estate attorney to determine, what, if anything, needs to be done.
my mother and father purchased property with father's brother and his wife. my father and his sister-in-law are deceased now and father's brother has remarried. he has no children, however there are children of his first and present wives. the only blood relative is a niece. without a will in the state of nc who is considered the heir?
RESPONSE: The heir of your uncle is his current wife.
After my grandmother passed, my grandfather added his daughter to the deed as "joint tenant with right of survivorship". Prior to my grandfather's passing, his daughter got married. Does her husband have any right to the property due to the fact that she wasn't the sole owner of the property until after they were married (when my grandfather passed). We are in NC
RESPONSE: Yes, her husband does that certain rights to the property. Please consult with an attorney to be fully advised as to the extent of these rights.
My husband, a South Carolina resident, was named in his uncle's will as the as Personal Representative of his estate. His uncle was domiciled in South Carolina at the time of death, but owned real property in both North Carolina and South Carolina. My husband is probating the will in SC and has filed for ancillary administration in NC. In both states it appears that property passes to the devisees, by operation of law, at the time death. However, in SC the property may be sold by the PR, without necessity of court order. If I am reading the NC Code correctly, it appears that a PR must petition the court in NC to sell the real property unless it was specifically devised to the PR in the will or necessary to satisfy creditors (which is not the case in this situation). Is this correct? There are more than 20 heirs, all of whom wish to sell the property. It would be cumbersome to have to obtain deeds from each of the heirs to sell the property. Must my husband follow the NC law, and does he have to petition the court to sell the property, or does the SC law control with respect to this matter?
RESPONSE: NC law must be followed with respect to the NC property - each of the devisees (and their spouses) must sign the deed or a power of attorney to allow to the sale of the property. A petition to the court is not appropriate in this situation.
my husband and his brother are joint owners in their mothers house after she passed away. the brother has lived there for the last 6 years and has decreased the value of the house by neglecting the upkeep. my husband wants him to move out so he can sell it. does he have the right to do that?
RESPONSE: Your husband will need to initiate a court proceeding called "Petition for Sale in Lieu of Partition" in the county in which the property is located. I recommend that he hire an attorney experienced in such matters to assist him.
my Husben and me and my brother are on my moms deed of the house and my MOM and my brother passed awy and my brother had married 14 days before he died how do we get my brothers name off the house and does his wife get a share
RESPONSE: I cannot answer your question with reviewing the deed. I recommend that you take the deed to a lawyer for advice.
My father died this year. My mother now wishes to transfer the residence to her revoc.living trust. The 1974 deed to their residence names them as husband and wife, grantee (no 'jtwros'). They were married up to the time of his death. Did the property automatically pass to my mother at the moment of his death under NC law on 'tenants by the entirety' so she is free to transfer the property into her RLT by gift deed or does she have to 'probate' the property or pursue some other action?
RESPONSE: Yes, she can transfer the property to her trust. No probate required.
Does a failed attempt to create a tenancy- by-the-entirety by an unmarried couple result in a tenancy-in-common ,or no interest at all?. Note: couple lives in n. c.(where common law marriage is not recognized). In this case Male added Female's name to deed of a house that he paid for solely. Female even changed last name to that of Male. Female is now deceased, and her children are claiming her alleged share. Please advise.
RESPONSE: I cannot say for sure without reviewing the deed, but I believe it would be a tenancy in common.
In North Carolina, can a joint tenancy with right of survivorship be severed by one of the joint tenants transferring her interest to her self?
RESPONSE: Not with real estate.
My boyfriend and I are joint owners of a house in Union County, NC. He has moved out of state. We re-financed a few months back and he is the main borrower. If he does not pay his half of the mortgage, is there anything that I can do to collect from him?
RESPONSE: I recommend that you consult with an attorney to determine your rights and options in this matter.
In a North Carolina Deed, if the conveyance was made to a husband and wife as "tenants by the entirety", and the words "with the right of survivorship" were not included in the Deed of conveyance, what is the result upon the death of the first spouse to die?
RESPONSE: The survivor will own the entire property.
Is Enhanced Life Estate Deed (Lady Bird Deed) legal in NC?
RESPONSE: I think they are "legal" but the NC Division of Medical Assistance has taken the position that a lady bird deed is a transfer for Medicaid purposes ( I'm not sure if that's been tested or challenged yet). We do not use them in Medicaid planning.
I have a NC deed that says husband and wife own 1/2 interest and son owns 1/2 interest in real property by tenants in entirety? What does this mean? Is this legal in NC? Who owns the property once the mortgage is paid in full?
RESPONSE: It is likely that the husband that the husband and wife together own one-half as tenants by the entirety and the son owns a one-half tenant in common interest. I would need to see the actual deed to render a opinion.
Hi, My Grandmother and I own a home. The deed has the rights surviorship. My Grandmother has lots of medical bills that she cannot pay. If she passes away and the house goes to me will her creditors attempt to take the house. Thank you!!
RESPONSE: No.
Hi,
My uncle passed away in NC. His divorce was final a few months prior to his death. In the divorce decree, there are several assets (i.e. cars, house, etc...) that were his as part of the divorce. At the time of his death, the titles or deeds had not been converted solely into his name. Since his ex-wife's name is still on the assets do they now belong to her? If I did not mentioned it, he had three children.
RESPONSE: No. She will still need to comply with the divorce decree.
I'm in North Carolina -
In 2006, before moving to an assisted-living facility, my aunt deeded me 1 percent of her real property. The deed specifies Tenant-in-Common ownership WITH rights of Survivorship.
She passed last month and the Clerk of Court's office is telling me the 99 percent is subject to debt claims and must be probated. My lawyer disagrees.
What does NC law say?
RESPONSE: NC law does not allow for tenancy in common ownership with right of survivorship, so the Clerk is correct.
How do my husband and I ensure that our property (house, car, bank accounts) pass to our children if we have a joint tenancy with full rights of survivorship on the deed? We have one child presently and plan to have at least two more in the future, but the deed only states my husband and I as joint tenants with full rights of survivorship.
RESPONSE: I generally do not recommend joint tenancy with rights of survivorship as a way to pass assets on to children, particularly if they are minors. I recommend that you consult with an estate planning attorney to develop a comprehensive plan that will protect your family.
My mother owns a townhouse in NC that I am looking at purchasing a 1% interest in. A deed would be prepared making us joint tenants with right of survivorship. She currently resides in a nursing home receiving medicaid. At her passing will the property be subject to medicaid estate recovery claims or will it pass directly to me as the surviving tenant and skip probate?
RESPONSE: The property will pass directly to you and not go through probate.
My aunt owns a house and land in that my mother has lived in and taken care of for the past 15 years. They are sisters and have decided that they want to put the house in both of their names as JTWRS. What is the best way to do this? Are there any forms online?
RESPONSE: I recommend that your aunt hire an attorney to prepare the deed and advise her regarding gift tax and other possible consequences of the transfer.
My father had a trust in CA. and owned a house in NC. Their were three trustee's and then my brother passed away,leaving two trustee's who would his (my brothers) share go to? The remaining trustee's or to his wife, children?
RESPONSE: I don't have enough information to answer the question. It depends on the order of deaths and what the trust provides.
My mother passed away in GA and owns a property in North Carolina which was deeded solely in her name with no right to survivorship. I am an only child. Upon her death my father presented a trust which mentions the property but the property was never deeded into the trust. At this point is the property property of the trust or would it be split between me and my father 50/50?
RESPONSE: It depends on whether your mother had a will and, if so, what it provided. Most people who do living trusts also have a will that puts all assets into the trust at their death.
My exhusband passed away. He had remarried and we have 2 kids together. He left oweing arrears in child support of several thousands of dollars that was beening handled by the state of NC. He and his wife were still legally married,even tho they hadn't lived together for atleast 8 months. The only property that I know of had both their names on it, Child support office said they were looking at the estate. Do you think any of that property would be sold to cover those arrears or can we look for anything at all to happen??
RESPONSE: If the property is real estate with both names on it, most likely it is protected and cannot be sold to pay debts.
I am recently married and am in the process of buying a home. My husband has a judgment on his credit,s o we are getting the mortgage in my name only. Do I have to put him on the deed? If so how do I do it so that his creditors do not try to put a lien on the house? It sounds like the "joint tenans w/ right of survivorship" is not for me.
RESPONSE: You should consult with a lawyer in your state to determine the best way to hold title to your home.
My brother and I inherited a very low value house when our father died and it is deeded to both of us but without right of survivorship. He moved into the house and I wanted to sell it. He says he wants to buy my part out but makes no effort to pay anything. If something happens to me, where will may part of the house go? And do I have any right to ask him to being making payments to purchase my half?
RESPONSE: Your Last Will and Testament will determine where your part of the property goes at your death. You cannot force your brother to buy you out. You will need to file a court action to have the court order a sale. I recommend that you consult with an attorney.
A husband and wife own a piece of NC real estate as tenants by the entirety. If they divorce but continue to own the property, how can they get their new ownership interests to be Joint Tenants with Survivorship rather than tenants in common?
RESPONSE: They would have see a lawyer to have a new deed prepared.
If the a North carolina Deed does not mention the type of ownership e.g, tenants by entirety, tenants-in-common, etc.) what is the type of ownership assumed if the deed did mention husband and wife as grantees?
RESPONSE: tenancy by the entirety.
First, thank you very much for your great blog. I appreciate you taking time to answer our questions. I am wondering if, in NC, a property deed is recorded as Joint Tenants with Rights of Survivorship, but a mortgage in good standing (not in default) is still held, does NC estate law permit the lender to demand payment in full upon the death of one of the tenants? Not that this action has occurred, just that I have been told it could be a possibilty and I am failing to understand why any lender would take such action against a loan not in default.
RESPONSE: Federal law prohibits calling the mortgage under these circumstances. See http://www.ncestateplanningblog.com/2009/01/articles/real-property/i-inherited-a-house-do-i-have-to-refinance-the-mortgage