The Right of Survivorship: What is it, Why is it Important, and How Does It Work?
When someone dies, surviving family members, friends, and others may wonder what happens to their assets. The right of survivorship is a type of ownership that kicks in when two or more people own an asset together. If you’re in that situation, it’s important to understand what this right is, why it matters, and how it works.
What is the Definition of the Right of Survivorship?
When a property is owned by two or more people with the right of survivorship, it means that when one person dies, the other owners receive his share equally. This continues until only one owner remains who has total ownership.
Not all property comes with the right of survivorship. If it exists, it’s included in the title. The goal with this type of ownership is that it allows the property to remain with the same owners. You will see this with married couples with the surviving spouse keeping the property when their husband or wife dies. Business owners may also benefit from right of survivorship to allow the other owners to keep the property until they can sell it or to keep it for future generations.
Personal property, such as a vehicle, may be assigned the right of survivorship. Bank accounts, investment accounts, and other assets may have joint owners. Real estate can also be jointly owned with the right of survivorship. Whether it is real or personal property, right of survivorship can only work with joint tenancy.
How Right of Survivorship works with Joint Tenancy and Tenancy in Common
Joint tenancy works with right of survivorship because the surviving owner will inherit the rest of the property when the other owner dies. This isn’t the case with tenancy in common. In this situation, the deceased owner can leave their part of the property to their own heirs. They could write up a will and choose anyone to be their heir to the property.
Most attorneys will recommend their clients to use joint tenancy and right of survivorship when entering into a legal agreement for property with other owners. This protects them as it ensures continuity of ownership if an owner dies.
How Does Right of Survivorship Affect the Will?
Sometimes a will has different instructions for property than what the deed indicates with right of survivorship. You may wonder which one takes precedence in determining what happens to the property. Most of the time, the property won’t be included in the will because the right of survivorship determines what happens.
Of course, there is an exception when the other owner of the property has already passed away. In this case, the will determines who receives the property. However, the right of survivorship takes over if it is still active.
Can Right of Survivorship be Terminated?
Sometimes an owner of property may want to terminate the right of survivorship for some reason. They may want to sell their part of the property. In this case, the owners would need the court to solve the issue. The property would need to be divided up among the other owners. They would pay for the portion that belongs to the owner who was selling.
If the decision is to sell to another owner, the property would have tenants in common instead of joint tenancy. The buyer wouldn’t have any right of survivorship, but they would be able to sell it anytime they wanted to whomever they wanted. The other owners would still be bound by right of survivorship on their portion of the property.
When is Right of Survivorship Not a Good Idea?
Right of survivorship isn’t always the right option for a person or business. There are times when it doesn’t make sense because of the priorities of the owner. For instance, a person may want their children to inherit a property instead of their surviving spouse, especially in regards to a family business.
In another situation, the business owner may want their heirs to inherit the company instead of the other owners after his or her death. For this to happen, the property would need to have tenants in common.
Even when right of survivorship is a good idea, it’s important for the surviving joint tenant to understand that they will need to pay the estate taxes on the property. Estate taxes can be costly and place a financial burden on the surviving owner. An estate planning attorney can assist with planning for property owned by two or more parties.
What are the Benefits of the Right of Survivorship?
You may wonder why someone would choose the right of survivorship for their property or other assets. One of the reasons it is so popular is because it takes precedence over any other claim to the property. It even supersedes what happens in probate and is settled much faster. Probate can take months to be resolved while right to survivorship occurs immediately.
For the right of survivorship to work, the ownership of the property must be set up correctly. Joint tenancy must be legal, which is why it’s a good idea to have it handled by an attorney. The actual deed or title must state that it is a property of joint tenants with the right of survivorship. Each state has it’s own requirements for what satisfies right of survivorship. Many times, the property must be owned equally to qualify for joint tenancy.
The deed must be filed at the courthouse. A real estate attorney can set up the joint tenancy and ensure that the property doesn’t need to go through probate.
How to Utilize the Right of Survivorship
If you are the surviving owner of a property, you will automatically receive complete ownership. You don’t even have to transfer the title into your name. However, you will need to produce a few documents and file them with the court.
First, you’ll need a copy of the death certificate. You will also need a document that shows you are the sole owner of the property. This form usually needs to be notarized. You will need to file these documents with the county court.
If you’re not sure what to do about property with the right of survivorship or you don’t know the local laws, you can seek legal advice from a lawyer who can answer your questions and help you fill out the correct forms.