Two Names on Deed, One Person Dies, What Then?

Summary:

If there are two names on the deed of a property, the transfer of the asset after the death of an owner depends on how the property ownership was structured. If the ownership structure is “joint tenants with rights of survivorship” or “tenants by the entirety,” then it passes directly to the surviving joint tenant. However, if the tenancy is under a “tenants in common” ownership structure, the interest in the property transfers to the estate of the deceased rather than the second person on the title.

If you own a property with another person, you might want to review the ownership structure so that you understand what would happen to the deed if the other person died. Depending on the structure, the property is not guaranteed to pass to you, the surviving owner. It could pass to another person in the second owner’s estate.

The specific rules and regulations regarding ownership of property in the United States are dictated by location. However, in most cases, there are three ownership structures for a deed with two names on it: “tenants in common,” “joint tenants/joint tenants with rights of survivorship,” and “tenancy by the entirety.” All these structures have different implications. Whether you already own a home or you are a prospective homebuyer, you should make sure you understand each term. Keep reading to learn more about ownership structures.

Understanding real property ownership structures

The first order of business, if you jointly own a property or are looking to buy one with someone, is to understand the three most prevalent ownership structures. Joint owners will usually have an ownership structure that follows one of these main legal concepts, regardless of their state or county. These are joint tenants/joint tenants with rights of survivorship, tenancy by the entirety, and tenants in common.

Joint tenants with rights of survivorship

Joint tenants with rights of survivorship, or JTWROS, is often referred to as “joint tenants.” With this ownership structure, tenants have an equal right to the asset. After one of the tenants passes away, the property immediately passes to the surviving party. The surviving party can do with the asset as they see fit. They can live in it, sell it, rent it out, or refinance it to pull out equity. With this type of structure, you entirely avoid probate court, which can be time-consuming and costly, depending on the ownership structure.

If the property is set up as a joint tenants/JTWROS, that will, in most cases, be printed or written on the deed. For example, say two people, Camilo Gaviera and Wang Wen Luan, have a joint tenants arrangement on their property. Wang Wen Luan owns 70% of the property, and Camilo Gaviera owns 30% of the property.

The deed might read as follows:

Camilo Gaviera and Wang Wen Luan, as joint tenants

OR

Camilo Gaviera and Wang Wen Luan, JTWROS

Joint tenants ownership structure

Result: Property passed to Camilo Gaviera

Need for probate court: None

Tax implications: None

If this appears on their deed and Wang Wen Luan dies, then the asset transfers to Camilo Gaviera. Even if Mr. Gaviera only owned 30% of the property and Wang Wen Luan owned 70%, the right of survivorship implies that Mr. Gaviera receives Ms. Wang’s share in full, and thus the entire property, on her death.

Tenants by the entirety

Tenancy by the entirety is an ownership structure typically reserved for married couples in which most of the property falls under “community property,” similar to a joint bank account. Unlike the “joint tenants” ownership structure, in which different owners can have different amounts of equity in the property, tenancy by the entirety works differently. In this type of structure, each of the owners on the deed is entitled to 100% ownership, not the standard 50/50 share.

Tenancy by the entirety also comes with the right to survivorship. Not only does each spouse get 100% equal rights to the property, but when one spouse dies, the surviving spouse is guaranteed to have the property passed to them free of charge. In this example, Mr. Gaviera and Ms. Wang were married and thus are tenants by the entirety.

Tenancy by the entirety ownership structure

Result: Property passed to Camilo Gaviera

Need for probate court: None

Tax implications: None

If Ms. Wang dies, the property transfers to the co-owner, Mr. Gaviera, and he can do what he wants with it.

Tenants in common

Tenancy in common is much trickier than the first two options, as the property or asset does not directly transfer to the other person on the deed. Instead, each person’s share is treated as separate property. The surviving person, Ms. Wang, receives her equity portion of the property directly via a buyout of Mr. Gaviera’s portion of the property or a sale of the property. For the deceased owner’s interest, his share of the property will pass directly to the estate that he has most likely detailed in a will.

In this situation, the case will likely be sent to a probate court to divvy up the assets with a possible executor of the estate or trustee. If there is a surviving party, that person will need to decide what they are going to do with the property. In many cases, after the probate court has assessed the value, the surviving party can buy the estate out of its portion or put the property up for sale.

Pro Tip

If the property has appreciated in value and sells, the surviving party might be liable for capital gains tax. The deceased party’s estate might be liable for inheritance tax obligations, depending upon the amount of the estate and other variables.

Let’s go back to our example of Camilo Gaviera and Wang Wen Luan. We will use the first example of them splitting the property 70/30, but in this example, they will have a “tenants in common” ownership structure. In this example, Ms. Wang’s estate and Mr. Gaviera agree to sell the property.

Ms. Wang and Mr. Gaviera’s purchase price: $100,000

Current value: $300,000

Ms. Wang’s estate equity portion: $210,000 (70%)

Mr. Gaviera’s equity portion: $90,000 (30%)

Tenants in common ownership structure

Result: Passes to Ms. Wang’s estate and to Mr. Gaviera for his portion

Need for probate court: Yes

Tax implications: Capital gains tax (Mr. Gaviera), potential for inheritance tax (Ms. Wang’s Estate)

As Mr. Gaviera only paid $30,000 for a 30% stake when he bought the property, and that equity value is now $60,000, he will be liable for capital gains in some form. For Ms. Wang’s estate, the $210,000 will be combined with the entire estate and given to the heirs, and they could be liable for inheritance tax based on that.

Paperwork needed to change the deed

Under a joint tenants or tenants-by-the-entirety structure, the survivor benefits from the standpoint that, legally, the entire property transfers at the time of death. However, the surviving party will probably want to change the deed and official record to reflect the change. This can also be applicable if the second party in a tenants-in-common case decides to buy out the other portion and keep the property. In this case, they will need to:

  1. Find the County Recorder, Registry of Deeds, or similar local office
  2. Bring a sworn statement signed by the survivor
  3. Provide a certified copy of the death certificate

Depending on where you live, the sworn statements can be called such things as “Affidavit-Death of Joint Tenant,” “Affidavit: Death of Spouse,” “Change Title,” or a number of different names. Your state or county may request additional documents, so you might want to call the relevant office and ask to be sure.

Can collections go after the asset for the debts of the deceased?

There are many instances when, if you owe someone money, that person might have the right to take your property in order to collect debts. For instance, using the example above, if Ms. Wang was sued at one point and lost, then the creditors could try to force a sale of a property owned in her name or place a lien against it. However, if Ms. Wang dies and the property transfers to Mr. Gaviera, then the creditors are out of luck. Under joint tenants with rights of survivorship or tenancy by the entirety, there is no way the creditors can go after the newly transferred property.

However, with a tenants-in-common structure, the estate is liable for the debts of the deceased. In short, the money made from the sale of the property by Ms. Wang’s heirs can potentially be used to pay off the debt that the estate owes on behalf of the deceased.

Once you understand ownership structures and are ready to buy a property, you’ll probably need a mortgage. Here are some lenders that can help get you started.

FAQ

What type of ownership has the right of survivorship?

The two structures with the right of survivorship are joint tenants/joint tenants with rights of survivorship and tenancy by the entirety.

What are the disadvantages of joint tenants with rights of survivorship?

One of the disadvantages of a JTWROS structure is that during an unstable relationship, neither party can sell their stake without the other party’s consent. Furthermore, only the surviving co-owner benefits rather than the heirs of the recently deceased spouse.

When property is held in joint tenants upon the death of one of the joint tenants, his or her interest in the property will do what?

From a legal standpoint, under joint ownership in a joint tenants or JTWROS arrangement, the interest in the property will immediately transfer to the other party without the need for probate court.

Does the right of survivorship override a will?

Yes, the right of survivorship overrides a will. When a joint tenant dies, only in a tenants-in-common structure without a right of survivorship does the property pass to the estate.

What is the difference between joint tenants with rights of survivorship and joint tenants?

There is no difference between the two. Depending on your location, the local nomenclature might be “joint tenants” instant of “joint tenants with rights of survivorship.”

Key takeaways

  • If there are two names on the deed of a property, the transfer of the asset after the death of an owner depends on how the ownership of the property was structured.
  • In the case of a joint tenants or JTWROS structure, if the co-owner dies, the property automatically passes to the surviving owner.
  • With a tenants-in-common property ownership structure, the property portion owned by the deceased person passes to the estate rather than the co-owner.
  • If you have a property passed to you from a recently deceased co-owner, you are only liable for their debts with a tenants-in-common structure.
View Article Sources
  1. Title to Real Property – NYC Bar Association
  2. Deed of Trust vs. Mortgage: 5 Important Differences – SuperMoney
  3. What is a Grant Deed and How Does It Work? – SuperMoney
  4. Family Trusts – SuperMoney