They say it takes two to tango. When it comes to real estate, does that still apply?
Specifically, we are interested in the concept of joint tenancy. This is an ownership structure that allows two or more people have an equitable right to a legal property.
The thing is, it can get a little confusing to understand. So if you want to fully understand the implications of joint tenancy, read on. We’ll break it down for you.
Right of Survivorship
A joint tenancy is shared property ownership between two or more people. It is where all parties have equal rights and interests in the property.
What is unique about this type of ownership is that when one of the joint tenants dies, the other tenants will inherit the deceased tenant’s interest. This is known as the Right of Survivorship.
In some cases, one of the parties may wish to sever a joint tenancy, which is the process of separating the rights and interests of the parties involved. It is important to understand the specifics regarding severing a joint tenancy, including the implications and legal aspects.
Creation
Joint tenancy can be created by including specific language in the property title or ownership documents. The language used typically needs to express the intent for joint tenancy.
It includes the names of the joint tenants. The specific requirements may vary depending on the jurisdiction, so it’s essential to consult with a local attorney or real estate professional to ensure compliance with the applicable laws.
Unity of Time, Title, Interest, and Possession
Joint tenancy is a unique form of ownership advantageous for many couples. It ensures that the titled portion equally belongs to both parties and that the ownership interest cannot be altered unless explicitly agreed to by both parties.
Additionally, “the right of survivorship” is inherent to joint tenancy, meaning that upon the death of one of the members, their interest in the property will pass to the other member. To create the joint tenancy, all parties must acquire the property with the same deed, evidenced by the “unity of time title interest and possession.”
Tax Considerations
There are a few things to remember about establishing joint tenancy and tax considerations. Joint tenants share equal ownership and are responsible for any applicable taxes.
Depending on the area, personal income tax may need to be paid separately or together. All the joint tenants usually pay property tax together.
Capital gains tax may also be applicable when selling a property owned by more than two people. When one of the joint tenants dies, the other(s) will inherit the property unless otherwise specified in a will. This can significantly impact capital gains tax over the long term, depending on when the deceased purchased the property and its current market value.
Consider Knowing Your Joint Tenancy Now
Joint tenancy is a beneficial and powerful form of ownership, but those considering putting their assets into common ownership should be sure to understand its responsibilities. Consult with an experienced financial or estate planner to ensure you know the details and ramifications of joint tenancy.
Contact an expert today to get the peace of mind that your assets are protected and owned by the right people in the right way.
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