Joint Tenants with Rights of Survivorship vs. Tenants in Common

There’s a common saying that it’s the little things that make the biggest difference. That is clearly illustrated in this discussion of “tenants in common” and “joint tenants with rights of survivorship.”

What are tenants in common (TIC) and joint tenants with rights of survivorship (JTWROS), and when do they apply?

When two or more people own a property or asset, such as a stock, each individual owns a share (or interest) of the whole, either as joint tenants or tenants in common. 

TIC means that each owner owns a specific percentage of the whole.  TIC may have different ownership ratios and the ownership does not have to be 50/50.  For instance, Tenant A may own 75% and Tenant B owns 25%.  TIC have no rights of survivorship.  This means that unless the deceased person’s will specifies that his/her interest is to be divided amount the surviving owners, the deceased person’s portion belongs to their estate.

In contrast, joint tenants typically own equal shares, which means that each person owns 50% of the asset.  JTWROS means that if one owner dies, the other owner automatically owns the remaining 50% without anything going to probate.

Let’s consider the following scenario…

George and Martha Washington own $100,000 of ABC stock as JTWROS.  The ownership is split 50/50, so George and Martha own $50,000 of ABC stock each.   If George passes away, then his shares (all $50,000 of ABC stock) go to Martha estate tax-free, probate free, with minimal issues.

John and Abigail Adams also own $100,000 of ABC stock and the ownership is split 50/50.  However, they own the stock as TIC.  If John passes away, Abigail will retain the 50% of the stock that is hers.  The 50% of the stock that was John’s now must go through the probate process as it belongs to his estate.

The above scenario illustrates that JTWROS is typically a much better choice for a married couple who desires that half goes to their surviving spouse with minimal delay or headaches.  However, in situations where the individual does want their half to go to another person (relative, children, etc.), it may make sense to have TIC.    

If you have any questions or if we at Kemp and Associates can help in any way, please feel free to contact us directly.

All information herein has been prepared solely for informational purposes, and it is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instrument or to participate in any particular trading strategy.

Securities and investment advisory services offered through National Planning Corporation (NPC), NPC of America in FL & NY, Member FINRA/SIPC, and a Registered Investment Adviser.  Registered Representatives of NPC may transact securities business in a particular state only if first registered, excluded or exempted from Broker-Dealer, agent or Investment Adviser Representative requirements.  In addition, follow-up conversations or meetings with individuals in a particular state that involve either the effecting or attempting to effect transaction in securities, or the rendering of personalized investment advice for compensation, will not be made absent compliance with state Broker-Dealer, agent or Investment Adviser Representative registration requirements, or an applicable exemption or exclusion.  Kemp and Associates and NPC are separate and unrelated companies.  NPC PRIVACY POLICY.      
NPC #74228    06/15

The information being provided is strictly as a courtesy.  When you link to any of the web sites provided herewith, you are leaving this site.  We make no representations as to the completeness or accuracy of the information provided at these sites.  Nor is the company liable for any direct or indirect technical or system issues or any consequences arising out of your access to or your use of third party technology, sites, information and programs made available through this site.  By clicking on the links above you will leave our web site and assume total responsibility and risk for your use of the sites to which you are linking.

Opinions voiced on this blog are not intended to provide specific advice and should not be construed as recommendations for any individual.  To determine which investments may be appropriate for you, consult with your financial, tax or legal professional.

Please consult your tax professional before taking any specific action or engaging in any strategy.  NPC does not render tax advice.