Joint Tenancy, as the name implies, is when two or more people own something jointly. None of the owners have any more ownership than the other owners. In more technical terms, they each own an undivided interest in the whole property. When one of the owners dies, the other surviving owner(s) still have an undivided interest in the whole property. The deceased joint tenant’s share expires with them.
As an example, three people own property in joint tenancy. When the first person passes away, their interest ceases to exist. Now the surviving two joint tenants still own the whole property. The deceased joint tenant has nothing to pass to their estate because their ownership interest in the property expired when they passed away.
Joint tenancy may be the most common estate planning tool I see in Oklahoma. Almost every husband and wife that own their home have it in joint tenancy or Tenancy by Entirety. For spouses, joint tenancy is usually the preferred way to own property. However there are several disadvantages for using it to pass property to someone other than a spouse. Some of the disadvantages to joint tenancy include:
- The property can be subject to the other owner’s creditors;
- Taxes may be more because of the way the property’s cost basis is determined;
- Creating a joint tenancy may create gift tax;
- The other joint tenant may sever the joint tenancy turning it into a tenancy in common;
- If the joint tenants die in a common disaster, there may be litigation to determine which person died first and which probate estate ends up with the property;
- One of the joint tenants can create problems in selling or mortgaging the property when the other joint tenant(s) want to sell.
Although joint tenancy has disadvantages, it can still play a role in Oklahoma estate planning.
This article was written 1/23/2015 by Todd Willhoite, an estate planning attorney in Claremore, specifically for the Oklahoma jurisdiction. A different result may occur in a different jurisdiction and the law does change, so it is important to seek competent legal and tax advice from professionals before acting on anything written in this article. Abby Law Offices Inc. is a law office that handles estate planning law in Claremore, Oklahoma.