In my initial estate planning meeting with clients, one very important question that I ask is “Do you hold your real estate as joint tenants or tenants in common?”
I am often answered with “We are both on the title” which doesn’t really answer my question. The reality is, lots of spouses have owned their principal residence for many years and can’t necessarily remember how they hold title. They know they are both registered on title, but whether they were registered as a ‘joint tenant’ or a ‘tenant in common’ is often a faded memory.
Clients will often ask “Does it make a difference?” The answer is yes, it can have a huge impact on an estate plan and I will explain why here.
If a property is held in joint tenancy, when one joint tenant dies, the entire property belongs to the remaining, surviving joint tenant (or joint tenants as the case may be).
Whoever is the last joint tenant to die owns the property. Only that last person can use his or her will to give the property to someone else.
So, for example, Sarah, Julia and Claire own a property as joint tenants. Claire passes away. She was married to Chris. Chris thought that Claire’s share would be his when Claire passed away but it isn’t because the property was held in joint tenancy with Sarah and Julia. Therefore, when Claire passes away, her share automatically flows to the surviving joint tenants Sarah and Julia, by right of survivorship. Chris gets nothing. Then, Julia passes away and Sarah is left as the sole owner of the property. The property will then pass to Sarah’s beneficiaries through her will. There will be nothing for Claire’s or Julia’s beneficiaries.
If Sarah, Julia and Claire owned the property as tenants-in-common, the story would be very different. They would each own a third and that third would belong only to them. They can leave their third to whomever they wish in their will. In this way, each of the individual owners retains control of her share and is able to gift her share to whomever she wishes.
Between spouses, a title is almost always held as joint tenants. This is so that when the first spouse dies, the other one will automatically own the family home without having to go through probate and pay probate taxes.
Thus, confirming how you hold title to your property is extremely important for your estate plan. Title holdings are easily changed via registration at the Land Title Office.