What is Joint Ownership of Property?

With the notable exception of retirement plans, IRA and life insurance, joint tenancy ownership can be used on almost all types of property. When considering holding property jointly, note that there are several types of joint ownership:

Tenancy in Common

Under this type of ownership, each joint owner owns an undivided fractional interest in the property. Each owner may own the same or a different percentage of the property, but have use of the entire property (also known as Unity of Possession). Unless they create an agreement to the contrary, each joint owner may do as he or she wishes with respect to his or interest, such gift it, sell it, or mortgage it without the consent or even knowledge of the other owners. Real estate owned in tenancy in common can be partitioned or encumbered by creditors. Upon the death of a joint owner, his or her interest in the property passes to his or her heirs or beneficiaries as provided in the Will, Trust or by the laws of intestacy. Under this type of joint ownership, a probate proceeding is possible. Some states, such as Illinois, presume that if property owned by two or more individuals is not clearly titled (such as without mention of a survivorship provision - see joint ownership with survivorship below), it is owned in tenancy in common. There is an exception to this rule in Illinois where a residence is held as husband and wife, then the presumption is that it is owned in tenancy by entirety (see below).

Tenancy by the Entirety

This form ownership is reserved for married couples. In most states, it is also reserved for a couple’s primary residence. Upon the death of the first spouse, title to the property passes to the surviving spouse outside of the probate process.

Owning property in tenancy by the entirety also has the benefit of creditor protection against joint creditors of a husband and wife. Non-joint creditors (with the exception of the IRS) are barred from partitioning, selling or encumbering the property without permission from both husband and wife. Unlike other types of joint ownership, the property cannot be conveyed by one spouse without the consent of the other. A tenancy by entirety may be terminated by a court ordered sale to satisfy a joint creditor, by the death of a spouse, by divorce, or by agreement between the co-owners. In Illinois, in order to title property in tenancy by the entirety, specific terminology to that effect must be used.

Community Property

Ten states (Alaska, Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin) have community property laws. In general, they provide that property acquired by either spouse (except for gifts or inheritances) or salary earned by either spouse during the course of a marriage is owned equally by each. The reasoning behind this law is that joint ownership recognizes contributions of both spouses to the family unit as a whole.

Joint Tenancy with Rights of Survivorship

Under this form of ownership, each joint owner owns an undivided equal interest in the whole property. Upon the death of one of the owners, the interest of the deceased owner passes automatically to the surviving owner or owners outside of probate. Property held in this manner can be partitioned, sold or encumbered without the consent of the other owners.

Disadvantages of Joint Tenancy with Rights of Survivorship

As mentioned in the Overview, joint tenancy with rights of survivorship avoids probate. However, as an estate planning tool to transfer assets to heirs or beneficiaries, there are a number of disadvantages worth noting which makes this type of ownership less appealing for such purposes, such as:

Step Up in Basis

Basis is generally defined as the amount you paid for an asset, plus the cost of later improvements. One must be careful of the application of the rules that apply to basis, if an asset is inherited or passed by joint tenancy. If an asset is inherited, the basis under current law of the entire asset changes to the value of the property as of the date of death of the previous owner. The new owner receives a 100% step-up (or step-down) in basis. If the new owners sell the asset at that time, the new owners can avoid or reduce capital gains tax on the appreciation (i.e. the difference in value from the new basis and the actual value at the date of sale). However, if the asset is owned as a joint tenancy with rights of survivorship, then only the interest that passed from the deceased owner gets a step-up (or step-down) in basis. The basis for the interest owned by the surviving owner is unchanged. If the asset is then sold, the survivor may have to pay substantial capital gains tax on the appreciation on his portion of the asset.

Gift Taxes

If you title an individual (other than a spouse), such as a child, as a joint owner on an asset, then you may be deemed to have gifted 1/2 of the property to that individual. If the value of that gift exceeds $13,000 (in 2009), a gift tax return must be filed and potential gift taxes paid.

Loss of Ownership and Control

Joint owners are legal owners of the asset. The asset cannot be sold, gifted, transferred or mortgaged without the approval of the other joint owners. If there are two or more joint owners, then in many jurisdictions they could force the asset to be sold.

Creditor Exposure

The asset is exposed to the creditors of all the joint owners. If a joint owner has credit issues, files for bankruptcy, is entangled in a lawsuit or is subject to a divorce proceeding, then the property could be subject to seizure, sale or collection.

No Fiduciary Duty to Joint Owners

Unlike the trustee of a trust, who has a fiduciary duty to the beneficiaries of the trust in the management of the trust assets, joint owners do not have any such fiduciary duty to the other joint owners. If a joint owners loses the property because of a debt, divorce proceeding or other issue, there is a little or no recourse for the remaining joint owners.

Common Disaster

If the joint owners die in a common disaster, the asset will be subject to a probate proceeding with the additional issue of determining which owner died first.


Joint ownership of property can play a role in an estate plan, however, there are disadvantages of making this type of ownership the primary focus of your estate plan. If you wish to discuss further the use of jointly owned property in conjunction with a will, trust or other estate planning vehicles, please contact any of our estate planning attorneys for assistance.