What Is Joint Tenancy?

Joint tenancy is a legal arrangement in which two or more people own a property together, each with equal rights and obligations. When one of the owners in a joint tenancy dies, that owner's interest in the property passes to the survivors without the property having to go through the courts.

How Joint Tenancy Works

Joint tenancy is most closely associated with real estate ownership, but the broader legal concept of joint tenancy with right of survivorship can apply to a range of assets, including businesses and brokerage accounts. The strong association with real estate exists because the term tenancy is seen as synonymous with owning or living in a home.

Joint tenancy is entered into by the joint tenants at the same time, usually through a deed. For example, let's say an unmarried couple purchases a house. At the time of purchase, they opt for joint tenancy. The deed to the property will name the two owners as joint tenants. If one person dies, the other person will automatically become the full owner of the property.

Pros and Cons of Joint Tenancy

Although joint tenancy has a number of advantages, there are some distinct disadvantages as well that should be considered before entering into the arrangement.

Pros

As mentioned earlier, as long as one joint tenant survives, it avoids the headaches of clearing the property through an estate via a will. Typically, a person's will upon death goes through probate, which is a legal process whereby the courts review a will to validate it. Typically, when a person dies, their assets aren't able to be accessed by the survivor until probate releases them.

Also, if a person didn't name beneficiaries or didn't have a will in place upon death, the probate process is used to help determine how the deceased assets are to be distributed. However, the process can easily take months to sort out. A joint tenancy avoids probate and a lengthy legal process allowing the joint tenant to take ownership of the assets immediately.

In addition to sharing the benefits of the property, all of the parties in a joint tenancy share responsibility for the property. For example, one person in the couple can’t take out a mortgage loan on the property and leave their partner with the debt. The joint tenancy applies for all of the assets as well as the debts—meaning if a loan is taken out on the property, both are responsible for the debt.

Cons

Divorce or marital issues can complicate a joint tenancy. As stated earlier, all debts are owned by both parties, and neither can sell their assets that are owned jointly without consent from their partner.

Another disadvantage of joint tenancy can appear in the handling of the asset upon the death of one or more of the joint tenants. Joint tenancy gives all the rights to the survivor, so even if the deceased was hoping to pass the value of the property to designated heirs, there is no legal obligation for the survivor to honor that request.

Pros

  • Joint tenancy avoids probate court when one of the tenants dies

  • Even with no will or beneficiaries named, the joint tenant inherits everything immediately

Cons

  • Marital issues can complicate and delay sale of assets since both tenants must agree

  • Joint tenancy gives all assets to the parter—not allowing the deceased to pass assets to heirs

Joint Tenancy and Tenancy in Common

One way to avoid losing control of the disposition of the property upon death, some joint owners opt for tenancy in common instead of a joint tenancy. Tenancy in common allows for percentage-based ownership, and shares can be traded and tenants added throughout the life of the arrangement rather than just at inception. In other words, upon death, the assets don't automatically go to the surviving partner as with joint tenancy; instead, the tenancy in common allows the assets to get distributed as stipulated in the will.