Welcome to part two of our four-part series: Translating Legalese with Barton Law. Legalese is used to describe legal terms and documents that are difficult for non-lawyers to understand. As attorneys, it is our job to translate these terms and documents for you to help you make well-informed decisions.
Joint Tenants with Right of Survivorship and Tenants in Common These phrases are used to refer to how assets are held between two or more parties. In this series, we'll be focusing on how these terms apply to real estate and what happens upon the death of an owner.
Joint tenants with right of survivorship (JTROS) is used when there are two or more parties sharing ownership in the property, and, in the event that one (or more) of the named parties dies, the ownership interest of the party that died will then pass to the surviving parties. For example, John and Mary, brother and sister, hold title to 123 Ocean Avenue as "John Doe and Mary Smith, as joint tenants with right of survivorship". This means that John and Mary each own one-half of the property, but the surviving sibling will automatically receive the other half when the first of the two siblings dies. If John dies first, then full title to the property vests in Mary alone. In other words, Mary now owns the entire property simply because she survived John. Even if John's Will directs his ownership to pass to his daughter, Sally, John's Will does not control the property. This designation on the deed controls and directs what will happen in the event of death. The property is still subject to creditors and other claims during their lifetimes and the interest being passed upon death (one-half in this example) is still subject to Pennsylvania's inheritance tax.
Tenants in common (TIC) differs from joint tenants with right of survivorship in that there is no automatic right to the property if one or more of the parties dies. Instead, tenants in common is used when there are two or more parties sharing ownership in a common property, but upon the death of one (or more) party, that party's ownership will pass through his Will or by intestacy. Following the example above, this would mean that John and Mary own title to 123 Ocean Avenue as "John Doe and Mary Smith, as tenants in common". Upon John's death, we would look to his Will (or intestate law if he doesn't have a Will) to determine who should receive his one-half interest in the property. As in the above example, John's Will directs that his one-half ownership interest should pass to his daughter, Susan. In this case, John's one-half ownership will pass through his Will to Susan and Mary will retain her one-half ownership.
In practice, the following may then occur:
A new deed may be drafted to now make Susan a one-half owner of the property,
One of the parties may choose to buy the other's one-half ownership interest to obtain full ownership of the property, or
The property may be sold and the proceeds be divided between the parties.
As with a JTROS deed, the property is subject to the creditors and other claims of the parties during their lifetimes and upon their deaths.
Bonus: Pennsylvania is one of few states that recognizes title known as tenants by the entirety (TBE) between spouses. This applies only to married couples and indicates that title is held by both spouses, entirely and simultaneously. The idea is that when a couple marries, they become one union rather than two separate people. This title provides the greatest protection for the married couple against creditors and claims. Many couples purchase homes together before marriage, but unfortunately often fail to later update their title to "tenants by the entirety" to provide the greatest protection possible.
This is a good time to double-check how your deed is titled. It is highly recommended that you consult with an attorney before making changes to your deed.