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   A Beginners Guide To Joint Tenancy

Joint Tenancy
Tenancy In Common
Tenancy By The Entirety
Is Jointly Owned Property Protected From Creditors?
State Joint Tenancy Law Deters IRS Seizure

One kind of joint tenancy exposes your assets to the claims of any creditors of either joint owner. Another only applies to real estate owned by a husband and wife and is a significant protection from the claims of the creditors of one of the spouses.

If you aren't confused about jointly owned assets, you are either a lawyer or you haven't had any reason to try to figure out the difference between the different forms of joint tenancy and how each one affects your ability to protect some of your assets from the claims of future creditors. The following is an attempt to explain the concepts in non-legal terms. If there are any lawyers who read this and feel that the information is not accurate, I'd be glad to publish your clarification within this document. Just send your comments to me by email.

Joint Tenancy

According to the Barron's Dictionary of Legal Terms, joint tenancy is
  • "A single estate in property, real or personal, owned by two or more persons, under one instrument or act of the parties, with an equal right in all to share in the enjoyment during their lives. On the death of a joint tenant, the property descends to the survivor or survivors and at length to the last survivor."
Mark Warda explains joint tenancy with right of survivorship as the "ownership of property where the survivor owns the entire property on the death of the other owner." 

My layman's understanding of this form of ownership is that it's the most common type of co-ownership - usually between relatives. In states that don't recognize tenancy by the entireties, the default would be joint ownership with the right of survivorship. As a practical matter, either co-owner can take full possession of the property at any time. Therefore, the property is available to satisfy the claims of the creditors of either owner. 

  • Thus, if you own property (like bank accounts, stocks or bonds) as joint owner with right of survivorship with your parents, your parent's could lose their assets if you get sued and lose.

Tenancy In Common

Barron's Dictionary Of Legal Terms defines "tenancy in common" as, 

  • "An interest held by two or more persons, each having a possesory right, usually deriving from a title in the same piece of land. Tenancy in common also applies to personality (personal property). Though co-tenants may have unequal shares in the property, they are each entitled to equal use and possession. Thus, each is said to have an undivided interest in the property. An estate held as tenancy in common be partitioned, sold or encumbered."
Warda describes tenancy in common as "ownership in which the death of one owner results in that person's interest going to his or her heirs".
  • It's my understanding that this form of ownership also exposes the assets to the claims of the creditors of either owner.

Tenancy By The Entirety

Barron's dictionary defines "tenancy by the entirety" as, 

  • "ownership of property, real or personal, tangible or intangible, by a husband and wife together. Neither husband nor wife is allowed to alienate any part of the property to held without (the) consent of the the other. The survivor of the marriage is entitled to the whole property. A divorce severs the tenancies by the entirety and usually creates a tenancy in common.
According to Mark Warda, tenancy by the entireties is recognized in about half the states, and "Under this arrangement, property owned by a married couple is considered to be owned by the couple as a unit and not as individuals. Neither party has the right to sell the property or any interest in it."

Because of the lack of severability of this form of ownership, the creditor of one spouse can't take the property in those states that offer this form of ownership. However, where a creditor has a claim against both spouses, the property can be taken by the creditor - like the IRS. 

Is Jointly Owned Property Protected From Creditors?

An article in Investor's Business Daily ((July 24, 1995) commented on seven ways that people can protect their assets from lawsuits. Most of what the article said was consistent with comments in past issues of my newsletter - except for one that set me back. 

The author said, 

  • "In some states, if property is held jointly and one person is sued, the property can't be taken for as long as the other person is alive and (the property) remains jointly held."
In one of my past newsletter issues, I commented on the asset protection benefits of real property held in tenancy by the entirety for married couples. Essentially, the statement quoted above would be true with respect to this type of joint ownership so long as only one spouse is subject to the claims of a specific creditor. (In some states this form of ownership isn't limited to real property.) However, that protection is only available in 27 states. 

A less common form of ownership is tenancy in common. According to Solomon and Saret (Asset Protection Strategies: Tax and Legal Aspects), "... tenants in common may generally transfer their interests without the consent of co-tenants. ... (each) tenant's creditors may generally reach the tenancy in common interest." 

As for the more common form of joint tenants with rights of survivorship, it's my understanding that the creditors of either joint tenant can take the jointly owned property and can dispose of it as they wish. As a writer, I certainly sympathize with the difficulty of trying to explain complex concepts in a short article. However, the loose phrase "jointly held property" can be very misleading unless it's clarified as to the specific form of joint ownership. 

State Joint Tenancy Law Deters IRS Seizure

According to Michael Savage, Esq., Editor of Taxes Interpreted, (6/24/96) 
  • "The courts can enjoin the IRS from seizing and selling a spouse's homestead interest in a state which requires spousal consent to sever the joint tenancy, the Eighth Circuit Court of Appeals has ruled. Irreparable injury results in such cases because the nonconsenting spouse would lose her right to exclude other people from the property. However, the survivor's interest of the spouse who owes the tax can be sold, the appeals court ruled."

Further details about protecting your assets from future lawsuits  are available in our subscriber's web site. Changes in the tax laws and various federal and state laws affecting various asset protection devices are provided in our monthly newsletter on Asset Protection Strategies

NOTICE: This Information is intended only for educational purposes and may be regarded as controversial by some legal experts. Readers should consult with a qualified  professional who is familiar with their specific financial and tax circumstances before adopting any ideas that are discussed in this article.

About the author:

Vernon Jacobs is a CPA/CLU who works as a tax author and consultant.  He  sponsors and moderates a free discussion group on asset protection and offshore topics.  His email address is  He can be reached by phone or fax at (913) 362-9667.

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