Joint Tenancy
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joint tenancy
Many misleading notions about joint tenancy exist. The information
presented here is intended to clear up misunderstandings about joint
tenancy.
what is joint tenancy?
Joint tenancy is a type of ownership in which two or more people share
an interest in personal property or real estate. If the interest is as
tenants in common, each person owns an undivided but individual
interest which goes to his heirs at death. If the interest is "with
right of survivorship", the interest goes to the surviving joint owner.
is joint tenancy a substitute for a will?
Joint tenancy does not take the place of a will. It applies to a
particular piece of property only. A properly drawn will disposes of
all property not held in joint tenancy. A will can be changed as often
as you choose. A joint tenancy agreement is difficult to change because
one co-owner may simply refuse to do so.
what are some common problems with joint tenancy?
Some real problems can develop with a joint tenancy agreement because
joint owners, even husband and wife, may disagree. It then becomes
difficult to make necessary decisions about management of the property,
repairs, division of income, and so forth.
It also affects who inherits your property on death. Even though your
will leaves your property to named individuals, if the bank account or
title to real estate is joint with right of survivorship, the joint
property will go to the surviving joint owner, not as provided by the
will.
Further, joint accounts on deposit in financial institutions are
subject to claims to pay debts, taxes and expenses of administration,
including statutory allowances to the surviving spouse, minor children
and dependent children, if other assets of the estate are insufficient.
Also, the financial institution has a lien against the account for any
unpaid indebtedness owed by the deceased to it.
does joint tenancy eliminate probate?
Joint tenancy may save probate expense. However, if the person who dies
owns property in addition to that held in joint tenancy, the othen
property must still be probated. An affidavit and a certified copy of
the death certificate must be recorded in order to vest the title to
real property in the surviving ownen or owners, which will require
payment of a reconding fee.
what taxes affect joint tenancy property?
At least four different kinds of taxes - Federal Income, Estate and
Gift taxes and South Dakota Estate tax (and South Dakota Inheritance
Tax in the case of persons dying prior to July 1, 2001) - may affect
joint property.
In some cases, joint tenancy ownership may result in taxes which might
not otherwise be nequired. Tax laws frequently change. The
ramifications of the tax laws should be considered when making the
decision concerning the use of joint tenancy.
should I use joint tenancy?
There are circumstances in which joint tenancy may be advisable, but as
in any decision involving your property, careful consideration should
be given to the advantages and disadvantages. It should be remembered
that when one owner of property held in joint tenancy dies, the
surviving owner or owners receive all interest in the property. If the
children of the deceased owner are not joint tenants, they have no
rights to the property. This factor, among others, should be considered
when deciding whether or not to place property in joint tenancy.
Be careful, ask your attorney so that you accomplish what you intended.
This brochure is based on South Dakota law and is designed to inform,
not to advise. No person should ever apply or interpret any law without
the aid of a trained attorney who knows the facts and may be aware of
any changes in the law.
The State Bar of South Dakota
222 East Capitol
Pierre, SD 57501
(Revised 2/03)
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