The Definition of Joint Tenants in Common
Assets can be owned in many ways: individually, by a trust or corporation or by several individuals. When two or more people have ownership in a property, each person's ownership must be defined in the title either as Joint with Rights of Survivorship or Joint Tenants in Common (JTIC). Correct titling of the property ensures that proper ownership has been established. There are advantages and disadvantages to titling property under the JTIC format.
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Definition
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Joint Tenants in Common is a way to designate land ownership between individuals who have their own separate interest in the property. If two people own a property and are on the title with Joint Tenants in Common and one dies, the other does not assume the ownership of the entire property. The portion of the other tenant is placed into his estate and executed to his survivors.
Joint with Rights of Survivorship
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Joint Tenants in Common is different from properties titled "Joint with Rights of Survivorship," which gives both individuals ownership rights, but if one should die, the other will assume all ownership of the property. This kind of titling is most common with married couples or long-term partners who want to make sure the property moves on to their spouse/mate upon their death.
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Circumstances for Title Difference
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When a property or other asset is being bought and the people involved in the transaction are looking to title it, they must consider what the ownership is during their lifetime and what their ownership should be after they die. Often, when someone says they want a joint account, it is assumed that the account will be with survivorship rights. This isn't always the case, even with married couples. An example of a case in which Joint Tenants in Common would be called for is one in which two brothers or friends buy an investment property and share in the expenses of owning it. Upon the death of either one, they want their portion to move into their estate, not to the other owner. There are cases where couples have Joint Tenants in Common. One prime example is someone who has a second family. He may want to own the property with his or her new spouse but want the asset to pass to the children from the first marriage upon death.
Benefits
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Joint Tenants in Common is a part of a smart estate plan. By designating that the asset is not owned by the partners to be transferred to each other, the property moves into the estate. Without this designation, the estate will not be credited or it may be credited with the wrong amount. Understanding the differences between a Joint with Rights of Survivorship and Joint Tenants in Common will save a lot of frustration for beneficiaries who may not get their inheritance otherwise. Even if a trust states they are to split the decedent's portion, if it is in not Joint Tenants in Common, they may have no claim to the asset.
Disadvantage
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Because the asset is transferred to beneficiaries of the joint owner who has died, the surviving owner is now subject to having his asset executed in an estate. This can be as simple as retitling the property to the new joint owners or buying out the beneficiaries' portion. However, if the beneficiaries are faced with liquidity issues and the property is the only means to access funds to pay taxes, debts and other expenses, then the joint owners and beneficiaries may find themselves in a stalemate. The surviving owner may not have the money to buy them out or may not want to sell. If the court so orders it, the property may be liquidated for less than fair market value leaving the surviving owner without the property and without an adequate settlement for his investment.
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