There are some terms you might come across as you develop your estate plan, such as JTWROS, that you should know about before you start making your plan in earnest. A JTWROS, which stands for joint tenancy with the right of survivorship, is a form of property ownership that can offer certain benefits for people interested in avoiding probate. However, this form of property ownership also has some significant negatives that you will need to consider. Always talk to your attorney whenever you have any question about a JTWROS or any other estate planning issue. Until then, here is what you should know about the joint tenancy with the right of survivorship.
Joint Property Ownership
People can one property jointly as co-owners in several different ways. One of the most common forms of co-ownership is the joint tenancy. This form of joint ownership is most commonly encountered with financial accounts or real estate, though almost any property can be owned in a joint tenancy. More often known as a joint tenancy with the right of survivorship, or JTWROS, the joint owners in a joint tenancy are known as joint or co-tenants. These tenants have the same right to own and use the property as the others.
Further, the rights of the co-tenants include the right of survivorship. With a right of survivorship, the co-tenants inherit the property interests that belonged to the other co-tenants upon that co-tenant’s death.
For example, let’s say that you and your two brothers inherit your family farm after your parents die. You take title to the farm as joint tenants in a JTWROS. Each of you has an equal, one-third share in the property. However, should your two brothers die, you will become the sole owner because of the right of survivorship.
Probate and JTWROS
A JTWROS is important for people concerned about probate because it allows for the transfer of property after an owner dies outside of the probate process. Rights of survivorship allow surviving co-tenants to inherit the share of a deceased co-tenant automatically. There’s no need for the surviving co-tenant to first go through probate before he or she receives the deceased co-tenant’s share of the property.
However, once the remaining co-tenant inherits the property, that property is no longer a jointly owned property. The surviving owner, who becomes the sole owner, cannot subsequently pass the property outside of probate to inheritors unless he or she takes some additional steps
So, while a JTWROS can provide some basic probate avoidance benefits, they aren’t right for many situations, for example when you want property to pass to your intended beneficiaries of your will or trust. Additionally, there are some other issues surrounding JTWROS that you should be aware of. One is that a joint tenancy ownership could expose your assets to the problems of your co-tenant, such as divorce, tax liens and judgments. Another is a loss of an important tax break, known as stepped-up basis, on the transfer of appreciated property. If you’re like to know more, contact an experienced and qualified estate planning attorney.