What Is Joint-Owned Property?
Joint-owned property is any property that's held in the name of two or more parties. They can be business partners or any other combination of people who have a reason to own property together. The matrimonial status of joint ownership of assets occurs when the two parties are spouses.
Joint-owned property can be held in several legal forms, including joint tenancy, tenancy by the entirety, community property, or in trust.
Key Takeaways
- Joint-owned property is any property that's held in the name of two or more parties such as spouses, business partners, friends, or family members.
- The risks of joint-owned property are the potential for financial issues if one party wants to sell their share.
- A joint-owned property can be manifest in several legal forms but joint tenancy is a popular option.
- Two or more property holders each have equal rights and obligations to the property until their death in a joint tenancy arrangement.
How Joint-Owned Property Works
A joint-owned property can be held as a joint tenancy. Two or more people have equal rights and obligations to the property they own together in this legal arrangement until one partner passes away.
The deceased owner's interest passes to the survivors without probate at this time. It's often referred to as a joint tenancy with rights of survivorship for this reason.
Tenancy by the entirety is another joint-owned property option that's reserved solely for spouses. Each spouse has an equal and undivided interest in the property. The full title of the property automatically passes to the surviving spouse if one spouse dies.
Two additional forms of jointly owned property also have distinct features: community property and trust property. A spouse can acquire community property during a marriage. This property legally belongs to both partners.
U.S. states with community property laws include Arizona, California, Idaho, Louisiana, Nevada, Texas, Washington, and Wisconsin as of 2024. Five other states allow partners to opt into community property provisions: Alaska, South Dakota, Kentucky, Tennessee, and Florida.
Each spouse can claim half the total income, if any, that's earned from community property.
Individuals can also create a joint option in a living trust. Both would be grantors and trustees. They can place individually- or jointly-owned assets into these trusts. Either of them can dissolve the trust during their lifetime provided that it's not irrevocable.
Choosing the best form of ownership for joint property can simplify things if one of the owners passes away. Joint tenancy is commonly used to avoid probate, which can be a lengthy, costly, and public process of distributing a deceased person's assets in court.
Risks of Joint-Owned Property
Joint- or jointly-owned property doesn't come without its risks. Individuals often desire to add others' names to the title of their property as a means of estate planning without attorney fees and this can bring added risks of embezzlement.
An elderly individual who's in cognitive decline might succumb to adding a friend or relation to a joint bank account. This individual would then have full withdrawal rights. This action is typically final and can't be undone after an individual adds another’s name to the title of a piece of property, Certain exceptions that can be pursued through the courts, however, such as in circ*mstances of fraud or financial exploitation of those deemed to be legally incompetent.
Does Property Automatically Become Community Property When People Get Married?
Yes, it generally does if it's acquired during the marriage. Premarital property or anything owned solely by one spouse before marriage doesn't become community property just because a marriage occurs unless some action is taken to make that happen.
Inheritances made to one spouse alone are typically considered to be individual, non-community property as well, even if they occur during the marriage. The exact rules can vary a little by state law, however.
Is Tenancy in Common a Form of Joint-Owned Property?
A tenancy in common is also a form of joint ownership but it doesn't carry rights of survivorship. Each owner retains the right to leave their share of the property to someone other than their co-owner in the event of their death. Shares of the property can be unequal as well. Party A might own 75% and Party B holds just 25%.
What Is an Irrevocable Trust?
The grantor or creator of an irrevocable trust can't change its terms or undo it after it's been established and funded with money and assets. This includes adding or deleting beneficiaries or taking back property that's been placed into the trust.
Irrevocable trusts come with some advantages, however. The grantor is surrendering ownership when they place assets into the trust so they're immune from estate taxes and creditor claims, unlike revocable trusts.
The Bottom Line
Joint-owned property is any to which title belongs to two or more people or entities. Both have ownership rights but this can create legal implications that can be difficult to manage under some circ*mstances.
Always consult with a legal professional before you enter into an ownership situation with another party, even if they’re a family member. Dissolving the arrangement if you change your mind can be complicated and financially prohibitive.
