DEFINITION of Joint Owned Property
Joint property is any property held in the name of two or more parties. These two parties could be a husband and wife, business partners, or another combination of people who have a reason to own property together. Property that is jointly owned may be held in one of several legal forms including joint tenancy, tenancy by the entirety, community property or in a trust.
BREAKING DOWN Joint Owned Property
As noted above joint owned property may be held in legal forms such as joint tenancy. This is when two or more people each have equal rights and obligations to the property that they rent or own together until one partner passes away. At this time, the owner's interest passes to the survivors without probate. Tenancy by entirety, another joint owned property option, is when the parties are husband and wife. In this case, each spouse has an equal and undivided interest in the property. If one spouse dies, the full title of the property automatically passes to the surviving spouse.
Two additional forms of joint owned property, community property and trust, also have distinct features. A spouse can acquire community property (marital property) during marriage. This property, such as a rental unit, legally belongs to both partners. As of May 2018, U.S. states with community-property laws included Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. In addition, Guam and Puerto Rico also have community-property legislation, and Alaska’s law is optional.
For tax purposes, each spouse may claim half of the total income earned from community property. Finally, in a living trust, spouses may create a joint option in which both individuals are grantors and trustees. They may place individually or jointly-owned assets in these trusts. Either person may revoke the trust during his or her lifetime.
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, a lengthy, costly and public process of distributing the deceased's assets in court.
Risks of Joint Owned Property
Joint owned property does not come without its risks. Although later in life individuals often desire to add others names’ to the title of their property as a means of estate planning without attorney fees, this can bring added risks of embezzlement. For example, if an elderly individual is in cognitive decline, he or she might succumb to adding a friend or relation to a joint bank account. The individual will then have full withdrawal rights. In addition, one an individual adds another’s name to the title of a piece of property, this act is final and cannot be undone.