About Joint Tenancy
When you are buying a new home, as long as there is more than one owner in the property, you are required to indicate the type of your ownership.
There are few choices of ownership when there are two or more people involved in joint ownership of the house. In this post, we will learn what is joint tenancy? And its pros and cons.
What is Joint Tenancy?
A joint tenancy is an equal ownership share. So if a property is purchased between married couples that have an equal share in the property.
In this type of ownership, the husband will own 50% ownership and the wife will have 50% ownership with something called “Right of Survivorship.”
This means that this team of husband and wife that just bought their house, are going to own this property till eternity until they sell it together.
There is a significant clause in the joint tenancy that states that when one of them passes or dies, their share of 50% goes directly to the surviving owner without any probation. This is called joint tenancy right of survivorship.
It is not necessary that this type of joint ownership of the house has to be between husband and wife. It could be two or more people involved in a joint tenancy.
For example, if four people decided to buy a property and, all of them wanted to be on title at the same time with the same interest in the same position and they want it o be right of survivorship.
In this case, the ownership would be 25% for each individual. Now, in case one of the owners passes away, his ownership share of 25% will be divided between the surviving members.
The remaining three members will now have joint ownership of the property of 33% each. And if another member passes away, the remaining two survivors will share the ownership outright in 50% ownership.
And if one of the two surviving members passes away, the final surviving member will have full 100% ownership of the property.
What are the factors of Joint Tenancy?
Four factors are involved in a joint tenancy are called P.I.T.T. Possession, Interest, Time, and Title.
I — Equal Possession:
All the joint ownership members of the house must have equal possession share and agree to that.
II — Equal Interest:
Each of the members must have an equal interest in the property and the same amount of duration that they are allowed to use it.
III — Time:
All the members in the agreement have to purchase the property at the same time. All of them have to be ready with the money and be prepared simultaneously for buying the property.
IV — Title:
All the members are outlined and explained on the same title deed mentioning that all of the parties own the specific amount and part it at this time.
How is Tenancy in Common Different from Joint Tenancy?
This type of ownership does not have to follow the four factors of the joint tenancy ownership. All the members can have a different share of the property.
It does not have to be purchased at the same time. Any member could be added if one of the members passes away.
If any one of the partners in this type of joint ownership passes away, the share of that member will go as per his/her will or as per their inheritance.
The other member of the property will continue to hold the same share of ownership listed as per the agreement and would not get any share from the partner who passed away unless mentioned in his will.
What are the Pros of Joint Tenancy?
The joint occupancy gives a more available passage into homeownership for first-time home purchasers and those keen on putting resources into land.
The main advantage of joint occupancy is that it makes homeownership more reasonable.
Joint ownership empowers co-occupants to part the initial installment and furnishes them with a benefit with regards to meeting all requirements for a home loan.
Joint ownership of the house likewise guarantees that co-proprietors can share all responsibilities regarding taking care of obligations, keeping up with and working on the property, and leasing it out (assuming the property is utilized to produce rental pay).
The way that co-occupants have an equivalent ownership share of the property gives each party motivation to do their part to safeguard their speculation.
Since tenancy ownership incorporates the right of survivorship, co-owners benefit from the capacity to stay away from probate, the extended lawful cycle that the court might take to approve wills.
Rather than going through probate, the enduring co-tenant(s) has quick admittance to their portions of the property whether or not the member who has passed away has prepared a will.
What are the Cons of Joint Tenancy?
Though it is a great tool and great vesting to select and a lot of people do select it because of the right to survivorship clause.
However, if it is a married couple taking the joint tenancy, what ends up happening is that when one of the spouses passes away the other spouse does not take full advantage of step-up in basis for tax purposes.
When they try to sell the property after the death of one of the spouses, the capital gains are imposed on a single surviving member.
It becomes equal responsibility for all the parties involved to take care of the property obligation like mortgage payments, property taxes, and homeowners insurance.
In an event of any one of the members losing the job, it is the responsibility of the remaining members to complete and fulfill these property obligations.
The joint ownership could be more challenging if there is any relationship difference between the parties.
Anyone individual would not be able to sell his/her part of the ownership share without obtaining permission from other parties.
Conclusion
Joint tenancy is a type f vesting during the process of escrow that the individual will choose when they are purchasing a property. It has various legal consequences as well as tax ramifications.
Hence, it is very important to understand exactly what joint tenancy means before you check that box during your escrow instructions and select it for your home purchase process.
It is suggested that you speak to a real estate lawyer before making a decision on the type of ownership so that you can make an informed decision.
https://www.compareclosing.com/blog/what-is-joint-tenancy-the-overview/
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