What Does Joint Tenancy Mean for a Deed of Trust?

A deed of trust is similar to a mortgage for real estate purchases. In some states, a trust deed unites the borrower, a lender and a trustee. The buyer/borrower gets the use of the property, and the trustee holds the title until the the loan is paid off. Sometimes the buyer includes two or more people as joint tenants. Although state laws vary, joint tenancy usually has similar fundamental characteristics.

Joint Tenants

  1. Joint tenants have one type of shared ownership, called joint tenancy. More than two persons can own property as joint tenants. For example, three or more people can share ownership of a business. Joint tenancy means that all owners have an equal share in the property. The equal shares are not divided and are fixed for life. All owners have an equal right to use all of the property. The joint tenancy originates for all owners at the same date through the same documents.

Right of Survivorship

  1. Joint tenants receive an automatic right of survivorship. If one tenant dies, the share of the deceased passes automatically to the remaining tenant or tenants. For example, a husband and wife own a home as joint tenants. When the husband dies, the wife becomes the sole owner. This right of survivorship comes from common law.

Selling Property

  1. If owners want to sell property held as joint tenants, all must agree to the sale. They also must divide the proceeds in equal portions. In case of disputes over the sale of jointly held property, sometimes the court must divide the property. For example, if a married couple divorces, the divorce court often divides the value of assets held jointly. The joint tenancy agreement is broken if one tenant transfers her interest to someone else. After the transfer, the resulting owners hold the property as tenants in common.

Tenants in Common

  1. Tenants in common differ in several ways from joint tenants. In tenancy in common, the partners can own unequal shares. Each tenant also has more freedom in disposing of his share. If one party transfers his share, this does not end the tenancy in common. Tenancy in common also does not imply any right of survivorship. When one dies, the property does not pass automatically to the surviving tenants. Instead, it passes to the heirs of the estate of the deceased tenant.

Tenancy By the Entirety

  1. Tenancy by entirety is a special type of joint tenancy only for married couples. The main difference for tenancy by the entirety is that each spouse must have the consent of the other to transfer his or her share in the property. Tenancy by the entirety also includes right of survivorship. In addition, this form of ownership shields the interest of each co-owner from the creditors of the other. A deed or will is necessary to enter into this form of ownership.

Pros and Cons

  1. The principal advantage of holding property as joint tenants is the ease of inheritance. When one tenant dies, the property goes to the survivor or survivors without passing through probate. However, any form of ownership with a minor, including joint tenancy, can present complications. For example, a parent and young child hold a home as joint tenants. If the parent dies before the child reaches majority, the court controls the property until the child reaches age 18. Joint tenancy can also have unexpected tax consequences, especially in some community property states.