What Are Joint Tenants With Right of Survivorship (JTWROS)?

What Are Joint Tenants With Right of Survivorship (JTWROS)?

Joint Tenants With Right of Survivorship (JTWROS) is a legal arrangement that grants co-owners equal ownership rights to an asset, such as a financial account, while ensuring that upon the death of one owner, their interest immediately transfers to the surviving owners. This arrangement bypasses the probate process and overrides any contrary instructions in a will, making it a popular choice for those seeking to ensure seamless transfer of assets. However, it's crucial for the joint tenants to maintain a stable relationship and fulfill their responsibilities, as financial or personal disputes can impact the effectiveness of this agreement.

How Joint Tenants With Right of Survivorship (JTWROS) Works

Contrary to what some people may believe, the term joint tenant with the right of survivorship has nothing to do with being a lessee or tenant in a rental apartment. JTWROS is actually a legal concept that applies to individuals who own assets, accounts, or other types of property. It is actually a form of co-tenancy, which is why this arrangement is also often called a joint tenancy.

Co-tenancy or joint tenancy describes how property can be owned by multiple people simultaneously. JTWROS is a type that grants co-owners equal use and rights, along with survivorship. But if one tenant dies, their ownership stake passes on to the surviving owner(s).

JTWROS is often used by married couples or parents and children, but it can also include unrelated parties for various financial accounts or assets:

• Real estate
• Checking, savings accounts
• Mutual funds
• Brokerage fund accounts

The JTWROS can change to a tenancy in common (TIC) if any party sells their interest, making it a less restrictive form of ownership.

Key Requirements for Establishing JTWROS

The creation of a JTWROS requires that the owners share what is known as four unities:

• The would-be co-owners must acquire the assets in question at the same time.
• The would-be co-owners must have the same title on the assets.
• Regardless of the individual amounts that each owner has given or paid for the assets, each owner must have an equal share of the total assets, given as 1/n, where n is the total number of owners.
• The would-be co-owners must each have the same right to possess the entirety of the assets.

A JTWROS cannot be created if any one of these four unities isn't established. The parties are then treated as tenants in common.

When creating a JTWROS account, explicit language is necessary to avoid it being treated as a tenancy in common in some jurisdictions.

Comparing JTWROS and Tenancy in Common (TIC)

A joint tenant with right of survivorship differs from a tenancy in common. While each party in a JTWROS has a right of survivorship over the asset, those in a TIC do not have the same legal right. Unless otherwise indicated, this means when a tenant dies, their ownership stake is passed on to an heir or other beneficiary of their choosing.

In JTWROS, parties must have equal stakes, but in tenancy in common, stakes can vary. For example, one owner might hold 75% of a property while others have 25%.

Unlike a JTWROS, there are several ways for parties to terminate a TIC. They include buying out the other party, selling the asset, and one or more heirs selling their stake.

Pros and Cons of Joint Tenancy With Right of Survivorship (JTWROS)

There are a number of benefits to entering into a JTWROS. Despite these advantages, this type of arrangement does come with certain drawbacks. We've listed some of the most common advantages and disadvantages of being a joint tenant with right of survivorship below.

Advantages

JTWROS avoids probate, meaning heirs can't inherit property; the last surviving owner absorbs all assets into their estate.

Survivorship also provides the remaining party(s) with other benefits in addition to avoiding probate. Surviving parties are allowed to continue using the asset without any interference from outside parties, including a deceased party's heirs.

Each party in a JTWROS must contribute to the property equally, in addition to holding an equal share and equal access to it. This means they must put in an equal share of any bills, such as property taxes, maintenance, or repairs. This takes the burden off one individual and spreads it out between everyone in the relationship.

Disadvantages

The most obvious disadvantage is that individuals can't pass or will their ownership stake to their heirs. Those who want to own property but don't want to give survivorship to the other owner(s) shouldn't consider this kind of agreement.

Everyone should ensure they have a stable and solid relationship before they enter into an agreement like a JTWROS. If relations between parties go south, it can impact the agreement.

Individuals should be sure they can afford the asset before they enter into a JTWROS. Financial strains can put a damper on the agreement, especially when one individual is doing their part. For instance, if one individual can't keep up with their financial obligations to repair a home or make payments on a mortgage, it could have a negative effect on the other party.

The Bottom Line

Owning property on your own can put a strain on your finances. But you can lessen the burden by entering into a special agreement with someone else. This agreement is called a joint tenant with the right of survivorship. Not only does it give you and your partner an equal share in the asset, but you also share equal responsibility.

Keep in mind, though, that your share goes to the surviving tenant if you die, which means you can't leave your share to any of your heirs. You may be better off becoming a tenant in common if you want to pass on your stake to someone else. Regardless of what route you take, be sure to consult a financial and/or legal professional to guide you.

Correction—April 26, 2023: The article was amended to reflect that each owner in a JTWROS structure must have an equal share, not a percentage, of the total assets expressed as 1/n, where n is the total number of owners.