Instead, when an owner passes away, that ownership share passes through his or her estate as per the terms stated in his or her will — and that leaves the asset open to probate. If the co-owner dies without a will, then the ownership share passes to surviving heirs. Some states make subtle distinctions. Take Michigan, for example.
Legally speaking, they must go a step further: all the joint tenants have to sign a written agreement certifying the creation of the joint tenancy.
There have been court battles in Texas over such documentation, or the lack thereof. Tiny as they may seem, you may have to know about them if you buy, sell, or inherit property in certain states.
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As you contribute to or sell parts of the asset your ownership interests adjust up and down pro-rata. When you die the titling distinction becomes very apparent. For my tax geeks out there, the amount of the property that is passed through the gross estate for estate tax purposes depends on whether or not the joint owners are spouses. TIC is very different. The assets are disposed of via your will or state intestacy law and must go through probate.
The property is not passed directly to the other property owner and will not be passed to the other owner unless your will or intestacy law says so.
Since there are independent ownership interests, only the portion attributable to the decedent goes through probate and is eventually inherited based on what the will or intestacy law dictates.
Of course, this share of the decedents account is passed through their gross estate for estate tax purposes. Basis is essentially the cost of the asset that is not subject to taxes when you receive it back.
Easy enough right? These percentages can be equal or unequal. When one tenant dies, her percentage interest would generally pass to beneficiaries in accordance with her Will or via intestacy if she has no Will , rather than passing automatically to the surviving tenant. The interest of the surviving tenant will remain unaffected by the death of his fellow tenant, except that he may now own property with a brand new tenant.
TIC accounts can be useful if the tenant prefers for her interest to pass to the beneficiaries in her Will rather than automatically to the surviving tenant. It is important in this case, however, to examine whether it makes practical sense for your named beneficiary to become a co-owner with the surviving tenant at your death. In addition, unlike TIC, when one tenant dies, her interest passes automatically by operation of law to the surviving tenant.
This can be a good way of ensuring funds are available to a surviving spouse to cover immediate expenses. It is important, however, to understand how the ownership of your accounts impact your existing testamentary plan. For example, if your Will names your father as beneficiary, but the bulk of your assets are comprised of JTWROS accounts held jointly with your mother, your mother would stand to benefit the most from your estate plan as a whole.
In short, the primary beneficiary of your estate may not simply be the person named in your Will. Only married couples can hold title to property as TBE.
Such a termination requires the consent of both spouses. Not all jurisdictions recognize this type of ownership structure and some states, like New York, limit its use to real property.
One of the major benefits of this type of ownership is the ability it affords a surviving spouse to shield property from the creditors of a deceased spouse. In this sense, it operates similarly to an IRA or employer retirement plan.
You retain the right to change or remove the beneficiary at any time. They are also administratively convenient in that they allow the beneficiary immediate access to the funds held in the account. At your death, the beneficiary is provided access to the funds after providing proof of your death.
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