Joint Tenants With Right Of Survivorship (JTWROS): What Are They And How Do They Work?

When you buy a home with someone – whether that be your spouse, sibling, other family member or friend – you’ll need to determine if both you and your fellow buyer hold equal rights to the property. You’ll also need to determine what happens if you or your fellow buyer dies. What happens to the home, and does the survivor take over full ownership?

In most cases, if you’re buying a home with a spouse, partner or family member, you’ll enter into a joint tenancy with right of survivorship agreement. This legal arrangement, often referred to by its acronym JTWROS, spells out the legal rights of all buyers and outlines what happens if one of the buyers dies or wants to sell the home.

If you’re purchasing a home with someone else, then, it’s important to understand how this legal ownership agreement works.

What Is Joint Tenancy With Right Of Survivorship?

A joint tenancy with right of survivorship is an agreement between two or more people to share equal ownership of an asset, such as a house, and have equal rights to use and enjoy it. It’s the most common way of buying a home with a spouse, partner or family member.

Say you and your spouse want to buy a home. Under a JTWROS arrangement, both you and your spouse would share equal ownership rights to the property. And if your spouse dies, the entire ownership of the home would pass onto you.

Joint tenancy, though, isn’t only reserved for spouses or partners. You can buy a home with a sibling, friend or even a business partner and specify that you want a joint tenancy arrangement. Again, if you or the person you buy with dies, the surviving buyer would take over sole ownership of the property.

You can also use this form of ownership if you are buying a property with more than one co-owner. If you buy a home with more than one buyer in a joint tenancy arrangement, the ownership of the home would pass equally to all other buyers if you died.

This ownership arrangement is popular because of the protections it offers to all owners: Under this arrangement, one of the buyers can’t decide to sell the home or take out a second mortgage without the agreement of all the others.

How Does Joint Tenancy With Right Of Survivorship Work?

The “right of survivorship” portion of a joint tenancy agreement is important: This means that if you or any other owner dies, that person’s interest in the real estate is immediately transferred to any survivors. If there are multiple remaining owners, the ownership interest is shared equally among them.

Because of this survivorship clause, the ownership interests of buyers who pass away do not go through the probate process. Owners who die can’t will their ownership interest to any heirs.

Say you purchased your home with a sibling under a JTWROS arrangement. If your sibling passes away, they can’t pass along an ownership interest to their children. Instead, that interest automatically passes onto you.

What Are The Benefits Of Joint Tenancy With Right Of Survivorship?

There is a reason why the joint tenancy with right of survivorship legal structure ranks as the most common way for two or more people to buy a home together: It comes with plenty of benefits.

The main ones are:

• Continuing tenancy: When one of the owners dies, the remaining owner immediately takes legal possession of the entire property. This owner will never have to share possession. In JTWROS, none of the owners can will their ownership portion of the property to anyone else. If there is more than one surviving owner, all surviving owners continue to share immediate possession of the home after one of the owners dies.
• Avoiding probate: Unlike in other ownership arrangements, no court action is necessary to transfer ownership rights to the surviving owner or owners. These rights are automatically transferred upon the death of an owner.
• Splitting ownership: With the JTWROS ownership model, it’s easy for the co-owners of a property to split ownership: Everyone has an equal share of the property. This also means that every co-owner is responsible for maintaining the home and making the mortgage payments.

What Are The Drawbacks Of Joint Tenancy With Right Of Survivorship?

As with all ownership models, joint tenancy with right of survivorship does come with some drawbacks. These include:

• Disregarding a will or owner’s heirs: Owners can’t will their ownership share to their heirs. When owners die, their share of the home immediately passes on to their co-owner or co-owners. If you want to pass your portion of a home to a child, you’ll need to seek a different form of ownership.
• Sharing financial responsibility: With this ownership model, all owners are equally responsible for making mortgage payments on a property. If one of the owners can’t make payments, the other owner or owners will have to cover the shortfall. This could place a financial burden on those owners who must cover for the missing financial contribution of a co-owner.
• Failing if the relationship sours: Partnerships can fail. If you buy a home with a partner and your relationship sours, you’ll have to both agree to sell the property. If you want to sell and your partner doesn’t, you are not legally allowed to put the property on the market. The same holds true if you want to refinance the mortgage on the property or take out a home equity loan. If your co-owner doesn’t agree, you can’t legally initiate a refinance or tap the equity in the property on your own.

Tax Implications For JTWROS

The tax implications of JTWROS arrangements vary depending on whether the owners of a property are married. If you have purchased a home with your spouse in a joint tenant arrangement, you might face capital gains taxes if you sell the home after your spouse dies. How much you pay in capital gains might be reduced. It's best to discuss this with your tax professional.

The good news is that you might not have to pay capital gains taxes at all when you sell your home. Usually, when you sell an asset, including a home, that increases in value, you are required to pay taxes on the profit that you earn. The amount you pay varies depending on your income, filing status and how long you owned the asset.

All U.S. taxpayers, though, qualify for a personal exemption ($250,000 for single individuals and $500,000 for married couples filing jointly) when selling their primary residence. If you make less than $250,000 in profit on the sale of your house as a single individual or $500,000 if you are selling with your spouse, then, you don't have to pay any capital gains taxes when selling your home.

If you and a non-spouse have entered into a JTWROS agreement, tax issues can be more complicated. If one of the owners dies, the IRS might consider the transfer of that owner's portion of the home as a gift, which means that you might have to file a gift return with the IRS.

Again, it's best to discuss these financial issues with your accountant or tax specialist, especially if you are purchasing a home with someone other than your spouse.

How To Enter A JTWROS Agreement

Entering into a JTWROS agreement is fairly simple: All co-owners of a property must acquire their equal share through the same house deed at the same time.

When you buy a home, you and your co-buyer – whether it's your spouse, sibling, business partner or any other combination – must decide how you want to take title. If you want a JTWROS purchase, all buyers must agree to this.

There are other ways to hold title, of course. If you are buying with family members or business partners, you might want to meet with an attorney about the pros and cons of each type.

Joint Tenants With Right Of Survivorship Vs. Tenants In Common

While most buyers purchasing a home together do so with the JTWROS model, there are other ways for owners to hold title in a home. Another popular method for people buying property together? The tenants in common approach.

A tenants in common arrangement has a lot of the same benefits that come with the JTWROS approach, with a few more freedoms for the co-owners. It’s a popular choice for co-owners who aren’t married.

Tenants in common can hold unequal shares in a property. One owner may hold a 70% share while the other only has a 30% share. Co-tenants have the right to sell or transfer their shares as they choose.

Tenants in common is a good choice for buyers who want the ability to will their share of the property to someone who isn’t a co-owner. With tenants in common, there is no right to survivorship, making it possible for owners to leave their share of the property to their children or other heirs.

Joint Tenants With Right Of Survivorship Vs. Community Property

Some states are known as community property. states, which means that any property you purchase during your marriage belongs equally to both spouses. This type of ownership is only relevant to married couples in states in which this law applies.

Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington and Wisconsin are all community property states. Additionally, Alaska allows spouses to opt-in to this type of ownership.

With community property, both spouses automatically have an equal right to property purchased by either spouse during the marriage.

In a difference from JTWROS arrangements, though, spouses with this type of ownership may will their interest in the property to another party. But there is also an option for owners to include the right of survivorship in this type of ownership. If that happens, the deceased spouse’s interest would be transferred to the surviving spouse upon that person's death, similar to JTWROS. 

Joint Tenants With Right Of Survivorship (JTWROS) FAQs

Have questions about the joint tenancy with right of survivorship arrangement? Here are some answers.

Who pays taxes on a JTWROS account?

With a JTWROS ownership arrangement, all owners are equally responsible for paying the property taxes assessed on a home. If co-owners have taken out a mortgage together, they’ll typically pay extra with each mortgage payment, with these additional dollars deposited into an escrow account. Their lender will then pay property taxes on their behalf when these tax bills come due.

What is the step-up basis for JTWROS?

A step-up in basis matters when a co-owner dies. If you are a surviving owner in a JTWROS ownership agreement, you might be able to inherit your deceased partner's portion of the home at fair market value at the time of your co-owner's death instead of at the value of the property when you first purchased it.

The Bottom Line

How you and co-owners take title of a property that you buy together will have significant implications for what happens to the real estate after a co-owner dies. It also matters when it comes to paying the mortgage on a property. That’s why it’s so important to understand how JTWROS differs from other forms of shared tenancy. It’s always wise for buyers to speak with an attorney before deciding on how to take title of a home they are buying.

If you are ready to buy a home, whether on your own, with a spouse or with a family member or business partner, start a mortgage application with us today.