In addition to simply owning property in only your name, there are different types of joint ownership, as well. In Nevada, there are three recognized types of joint ownership of property: joint tenancy with right of survivorship, as community property with right of survivorship, or as tenants in common. The type of ownership you have in a particular property will determine how that property will be transferred at your death. Each type of property ownership has its own requirements, limitations, and advantages and disadvantages of joint tenancy. Understanding these different aspects of ownership before you make a choice, can lessen the possibility of problems in the future.
A joint tenancy is established when you own property with another person or persons, and you each hold an equal, undivided interest in that property. As a joint tenancy, you have the right to sell your interest in the property, or give it away, at any time, but doing so, will likely convert it to tenants-in-common. There could be exceptions such as if there were any restrictions created by contract, for instance. A joint tenant does not always have to be your spouse. You can have a bank account, for example, in your name and the name of your son or daughter.
Joint tenancy can have many advantages. First, property that is jointly owned, is not required to go through probate. Instead, the property is immediately available to the surviving joint tenants. This benefit can easily reduce the expense of probate. Another important benefit of joint tenancy is the fact that property that is jointly owned, may be protected from the creditors of the deceased owner.
There can be a few disadvantages. For example, when a married couple are joint tenants, and they later decide to divorce and remarry, modifying the title to that particular property can be complicated. Further, you lose significant capital tax advantages if you choose joint tenancy instead of community property ownership. Another issue that may arise with joint property in general is the fact that one tenant can sell the property without the approval of the other tenants.
Some joint tenancies contain the term “right of survivorship.” This term means that the property is automatically transferred to your surviving joint tenant upon your death. The surviving owner or owners continue to own the property. It also means that the heirs of the deceased owner receive absolutely nothing. Property owned in joint tenancy cannot be transferred by will. Property or accounts that are titled as joint tenancy do not require the term "right of survivorship," as it is assumed.
Only nine states treat the property of married couples as Community Property and Nevada is one of them. This means that, in Nevada, any property you owned before you were married is considered to belong to you separately. However, any property you obtained during your marriage is considered community property, which means your spouse owns an equal interest. The only exceptions are gifts or inheritances you received alone, during the marriage. Titling your property, real or personal, in community property gives the surviving spouse a stepped-up basis in appreciating assets, so they can be sold with little or no capital gains tax. In Nevada we can title our assets as Community Property with Right of Survivorship, so you get the same advantages as joint tenancy, but the capital gains tax advantage, as well.
If you have questions regarding the advantages and disadvantages of joint tenancy, or any other estate planning issues, please contact Anderson, Dorn & Rader, Ltd. You can reach out to us either online or by calling us at (775) 823-9455.