Brown & Associates - Attorneys & Counselors at Law, P.L.L.C.

"JOINT TENANCY, BOON OR BANE"
(12/31/00)

Over the past year or so, I have repeatedly touched on the subject of joint tenancy, but only in very general terms. At a recent estate planning seminar Gary Brown and I conducted, the attendees had a great number of questions about joint tenancies, so many that I felt it might be a good time to try to answer at least some of the questions and concerns in this column.

"Just What is Joint Tenancy?"

Joint tenancy is a unique type of property ownership in which two or more persons own real estate or other property together. Upon the death of one joint tenant, his or her interest in the property passes to the surviving joint tenant or tenants by operation of law and not in accordance with the terms of his or her will.

"Why Do So Many People Recommend Joint Tenancies?"

Many estate planning professionals and financial advisors recommend you use joint tenancies just because of this survivorship feature. Especially in smaller estates where estate taxes are not a concern, joint tenancies can eliminate the need for probate and can simplify the transfer of property from the decedent to the surviving co-owners.

"Does This Mean That Joint Tenancy can be used in Lieu of a Will?"

This is a common misconception. A will disposes of all the decedent's property in accordance with his or her testamentary plan. The joint tenancy only affects the particular piece of property described in the joint tenancy instrument. A will is still needed to dispose of any property not held in joint tenancy. While much of a decedent's property can be held in joint tenancy, we usually find some assets which either have been inherited or acquired by gift and are not held in joint tenancy. These still require court approval for transfer. If the decedent did not have a will, the court relies on the rules of descent and distribution which I discussed in last week's column. This statutory scheme of distribution may or may not have been how the decedent would have wished the property to pass.

"Can a Joint Tenant Convey His Interest in the Property?"

This answer is a qualified "yes". Normally, to convey good title to the entire parcel, both or all joint tenants would have to join in the deed. If only one joint tenant wanted to convey his interest, he could do so but the purchaser would only receive title to an undivided ½ or lesser interest in the property. The remaining joint tenant interest would remain with the other joint tenant(s) who did not join in the transfer. If the property is a personal residence and the other joint tenant is the spouse, special homestead rules apply which would prevent the purchaser from fully enjoying the benefit of his or her acquisition.

"What About Joint bank Accounts?" "Are These Joint Tenancies?"

The answer is "it depends". Only the bank can tell you how the account was opened. It is possible for more than one person to be an approved user of an account without being a joint tenant. Often a client will come to us after the death of a spouse believing that all financial accounts are held as joint tenants. He or she thinks all that will need to be done is for he or she to notify the appropriate institutions and submit a copy of the decedent's death certificate. When we dig deeper, we often find these accounts are not joint tenancies and that court action is required to properly convey title to the surviving spouse. Be sure you know how the account was set up and what rights each co-owner has to the account.

"If My Wife and I Purchase Property as Joint Tenants, Does this Effectively Disinherit My Children from a Previous Marriage?"

The answer is a clear and resounding "yes". Because the entire property is in joint tenancy and because it passes to the survivor free from any obligation to the children, you have successfully dis-inherited them as to this property. Your surviving spouse may remarry and place the property in joint tenancy with the new husband or wife. If your spouse then dies first, the property will pass to the new spouse and your children will be left out in the cold.

"If I Presently Own Property in My Name Only and Want to Establish a Joint Tenancy with my husband, will I have to pay taxes?"

Oklahoma repealed its state gift tax on January 1, 1982, so you won't owe any tax to Oklahoma when you create a joint tenancy.

Under federal law, spouses have an unlimited martial deduction that applies to lifetime gifts between them, so you will not owe a federal gift tax when you create the joint tenancy either.

Finally, your estate will not have to pay any Federal or Oklahoma estate tax on the jointly owned property at your death. Any interest you might have had in the property will pass to your surviving spouse under the estate tax unlimited marital deduction.

Next week, I'll address some of the other issues and misconceptions surrounding ownership of property in joint tenancy.

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