The importance of joint tenancy
Joint tenancy has significant legal effect not only during the lifetimes of joint tenants but also when one of them dies.
Each joint tenant, regardless of which one purchased or originally owned the property, has the right to use and to share in the income from the jointly owned property. A joint tenant's interest in the property terminates upon his or her death, and the surviving joint tenant or joint tenants then own the property free of any claim by the heirs of the joint tenant who died. This may not be the intent of the original joint tenants, because it bars descendants, heirs or beneficiaries and all but the surviving joint tenants from receiving any interest in the property.
Joint tenancy shouldn't be relied on as a substitute for a Will. It doesn't cover unanticipated contingencies. While it provides for a successor for a particular piece of property, joint tenancy doesn't provide a comprehensive plan for the disposition of one's entire estate as a Will does. Property held in joint tenancy does not pass under a Will.
Joint tenancy is not the only way to hold title to property with another person. Two or more persons may also own property as tenants-in-common or tenants by entireties. Tenants-in-common, like joint tenants, each have the right to use and share in the income from the property. However, when a tenant-in-common dies, his or her interest does not pass automatically to the surviving co-tenant. It passes, instead, as part of the estate to the heirs, or the beneficiaries under a Will. Tenants by the entireties allow a husband and wife to hold their residence free of claims against only one spouse.
When the ownership is in real estate, the deed normally includes the words "as joint tenants and not as tenants-in-common." For registered securities (stocks and bonds) the names of the owners are stated followed by the words "as joint tenants with right of survivorship, and not as tenants-in-common." For
bank accounts (both checking and savings) all of the joint tenants sign a signature card. The agreement on the back of the card creates a joint tenancy in the depositors.
U.S. savings bonds and other Treasury obligations, when the owners are listed as "A or B," either one may cash in the bond at any time. When one has died, the survivor is the sole owner.
If an asset is registered to "A payable on death to B," the asset is not owned in joint tenancy. Rather, the asset is payable to B on A's death, but B has no rights during A's lifetime.
Among other features of joint tenancy which should be considered are the following:
- All joint tenants must agree to the sale or mortgage of real estate and to the sale of registered stocks and bonds.
- Any one joint tenant may withdraw all or a part of the funds in a joint bank account.
- Any co-owner may redeem U.S. Treasury bonds.
- The creation of a joint tenancy has important legal consequences. Estate, gift or income taxes may be affected.
Joint tenancy may have other consequences. For example, if property of any kind is put in joint tenancy with a relative who receives welfare or other benefits (such as social security benefits) the relative's entitlement to these benefits may be jeopardized. If you place your residence in joint tenancy, you may lose your right to advantageous senior citizen real estate tax treatment. And, if you create a joint tenancy with a child (or anyone else), the child's creditors may seek to collect your child's debt from the property or from the proceeds of a judicial sale.
Joint tenancy is useful in the right case. However, joint tenancies are not a simple solution to estate problems but can, in fact, create problems where none existed. The costs of preparing a Will, tax planning and probate may be of little significance compared with the unintended problems that can arise from using joint tenancies indiscriminately. For a full explanation of the advantages and disadvantages of joint tenancy in your particular situation, you should consult a lawyer.
Note: This information was prepared as a public service by the Illinois State Bar Association and is a joint project with the Illinois Press Association. Its purpose is to inform citizens of their legal rights and obligations.
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If you have questions about the application of the law in a particular case, consult your lawyer. The law is constantly changing. Information on this site or any site to which we link does not constitute legal advice.