How to Take A Name Off of a Joint Tenancy Deed: The Definitive Guide
What’s a Joint Tenancy?
A joint tenancy agreement is a common method to co-own property. Most of us have probably heard of it or even entered into one. It can be found in residential property ownership, businesses, corporate entities, life support agreements of terminally ill patients and many other scenarios.
A joint tenancy agreement is an estate or interest in real property created by two or more persons (usually referred to as "joint tenants"). It is characterized by the survivorship right. What this means is that when a tenant passes away, the surviving tenants automatically inherit the deceased joint tenant’s share of property, thus extinguishing any inheritance rights to the deceased tenant’s real property. Parties benefit from joint tenancy agreements because they avoid dealings of real property with the deceased tenant’s interest in the property, even in intestacy cases. This is because the deceased tenant’s interest is not subject to his or her will and will not be dealt with in probate court, avoiding delays and costs for the surviving tenants .
A joint tenancy agreement has four distinct "unities" that all must exist at the same time and must be present for one to be legally binding:
- (1) Unity of Time – all joint tenants must take their interests or parties involved must acquire their interests at the same time
- (2) Unity of Title – all joint tenants must receive their interests by the same title or document
- (3) Unity of Interest – all joint tenants must have equal interest in the property
- (4) Unity of Possession – all joint tenants must have equal rights to the use and benefit of the property
Joint tenancy is not the same as tenancy in common, which is another common type of co-ownership. In a tenancy in common agreement, when one of the tenants passes away, his or her interest is passed on to his or her heirs as provided by the deceased tenant’s will, or if there was no will, as provided by law.
Why Remove A Name From A Joint Tenancy Deed
There are several scenarios in which property owners may wish to remove a name from a joint tenancy. If one of the original tenants passes away, their name is removed and that share of the property goes to the other tenants as per the stated percentages in the agreement. In the case of a divorce, if the owner of a property shared with an ex-spouse is no longer comfortable having that person on the paperwork, the name can be removed (assuming the spouse agrees in the case of a joint tenancy.) This can also be the case when removing an ex-partner or co-buyer/removing one partner after a break-up. In the case of inheritance issues, if an owner passes away and leaves ownership of the property to someone new, their name can be replaced on the deed. Even a revocable living trust can be considered in this case.
In other situations, the interest or investment in the property may change. An owner may no longer want to be tied to the property, or may not want to be responsible for the upkeep, which can be the case with a vacation home, rental property, or boat slip. If ownership is split between multiple partners or shared among family members or friends, a decision may be made to divvy things up or sell the assets so that the ownership can be distributed. Other times, illegal activity may be occurring on the property, such as drug sales or the usage of the space for prostitution.
Legal Steps for Removing a Name from a Joint Tenancy
If an individual or group wishes to remove a named party from a joint tenancy agreement, specific legal procedures must be followed. The process usually begins with a written request by an owner seeking to remove a named party. For agreement from the other joint tenants to be legally binding, it must be in accordance with the procedures outlined in the co-tenancy statute that the individual state. Each state is different in its requirements. The steps involved to modify a joint ownership agreement include: If a co-owner or joint tenant refuses to approve the changes, a court must be petitioned to enforce the removal of a party from the deed. When a removal is legally binding, the departing owner cannot receive their share of the property. Co-tenancy agreements are not a partnership, and each named party owns their fraction of the deed as they have purchased it, rather than as it is held by the whole of the group. A deed can only be modified if there is consent from all named owners. A legal removal requires that the owner seeking removal follow the agreed-upon termination agreement, file a petition with the appropriate courts, and have a judge sign the modification. If there is disagreement regarding a proposed removal, the joint owners may seek mediation before asking a judge to sign the modification.
Consequences of a Name Removal
Before removing a name from a joint tenancy agreement, it is imperative to consider the potential consequences. Following removal, the joint tenant’s legal claim to the property is extinguished. This extension of ownership usually leads to multiple negative financial and legal ramifications.
The most common issue caused by severing the joint tenancy is the change in property rights. With the exception of a few states, divorce courts will ordinarily not divide assets that are titled under a "survivorship" agreement. This means that, should one spouse file for divorce, the other is not entitled to any portion of the property and the entirety of the property is subject to the terms of the survivorship agreement. While this is not the case in all states, it is wise to confirm the laws in your state before taking action that could prevent property division in the event of a divorce.
In the absence of a divorce, reducing the names on a joint tenancy agreement could irreparably terminate inheritance rights either presently or in the future. For example, an individual may be able to remove his or her name from the agreement now, but if his or her spouse were to pass away tomorrow, ownership of the property may be divided instead of passed to the active heir or heirs . In this way, changing the terms of the agreement completely alters the estate plan of the deceased spouse. Instead of the active owner of the property receiving the entirety of the estate as was intended in the joint tenancy agreement, the deceased spouse’s portion of the estate could be passed to an entirely unintended party or parties.
Complications may also arise in the event that joint tenants take on debt. If one party holds joint responsibility for paying a debt, creditors have the right to pursue that debt in full. Typically, they must pursue the named debtor first before seeking the balance through an additional debtor. However, if the named debtor were to pass away before the debt were paid, the creditor could seek to hold either party fully responsible.
Finally, there are often tax implications to adding or subtracting names from the agreement. Whenever a property deed is changed, it is typically taxed as a "gift" for the purpose of property taxation. This could have serious tax implications for some individuals and therefore, it is wise to discuss a name change with a lawyer or accountant prior to the actual change. This is particularly true in situations where there are significant gifts to be made.
Other Options to Removing A Name
If a severance of joint tenancy is not a viable option, fortunately there are other solutions available. First, a joint tenant may consider converting the Joint Tenancy into a Tenancy In Common. A joint tenancy can be converted into a Tenancy in Common by a simple transfer of Deed – which can take effect simultaneously with or subsequent to the Severance of the Joint Tenancy. Converting a joint tenancy into tenant in common will be an effective solution if the intent is to allow the joint tenant’s heirs to take that person’s share of the property, as opposed to having the share revert back to the surviving joint tenant (which is the default rule under a Joint Tenancy). On the downside, creating a Tenancy In Common may result in accelerated capital gains tax exposure on the sale of the property. This is because there is no basis step-up for the deceased party’s share of the property. That said, if both parties are living at the time of sale, no capital gains tax will trigger the sale. Further, if the two parties to the Tenancy In Common are spouses, then the full amount of each spouse’s basis will be stepped up at death.
An alternate solution is to sell out the share of the joint tenant. The joint tenants could sell the land to a third party, who would then hold the property for the benefit of the two parties to the joint tenancy. In this way, the joint tenant eventually will have their equity freed up. However, not only is there the cost of brokering the sale, the transaction will be delayed by the time it takes to find a buyer. Finally, after the sale, the joint tenants will only be entitled to a share of the property as Tenants in Common so that capital gains taxes will be accelerated.
Another alternative available is for one joint tenant to acquire the other joint tenant’s share of the property pursuant to an agreement to sell the real estate. In this case, aside from the costs associated with brokering the deal, there should be a token to prevent a willful conveyance. A token of value generally suffices to prevent bankruptcy courts from voiding the conveyance as fraudulent.
FAQs About Removing A Name from A Joint Tenancy
Below are some commonly asked questions, along with answers I have given to clients and former clients who have called me to obtain additional information regarding the process and implications of removing a name from a joint tenancy agreement.
1. What are the effects of removing a name from a Joint Tenancy Agreement?
A deed executed by one joint tenant to sever the joint tenancy releases his or her interest in the property, leaving only the remaining joint tenants’ interest in the property as joint tenants, unless the deceased joint tenant occupied the property as a "community property survivor". This means that, instead of a transfer to the surviving spouse as joint tenants, the decedent’s property transfers as a community property survivor, and subject to such surviving spouse’s one half interest in the property. Since California is a community property state (unless otherwise declared at the time of marriage), this can create a substantial tax benefit for the surviving spouse who inherits the property.
2. How long will it take to remove a name from a Joint Tenancy Agreement?
Generally, if it is known that the remaining joint tenant is not the owner, a petition can be filed to remove his or her name from title. The procedure will take about six months. However , if a deed or grant deed is executed to remove a party’s signature, and the title company has knowledge that the decedent did not sign the deed willingly or he or she was under an undue influence while signing the documents, the title company may sue all of the parties who signed the deed. In this case, it may take 18 months to two years.
3. I have heard that a name on a Joint Tenancy Agreement will be removed when the other joint tenant dies. Is this true and when does this happen?
When the surviving joint tenant dies, the deceased’s interest in the property would be transferred to the estate of the surviving joint tenant if he or she died without a will or trust.
If the surviving joint tenant prepared a will that states the property passed to someone other than the decedent or executor, or if the surviving tenant died with a trust created prior to his or her death or established after his or her death, the transfer of the property will be to the named beneficiaries or heirs in the surviving joint tenant’s will or trust.
When there is a will or trust, a complete authority to sell will be required to show the date of death and authority to sell the property, before a sale may occur.