Right of Survivorship is a tool used in estate planning to protect the intent of a decedent regarding real estate property and other jointly held properties. Here’s a quick overview.
Right of Survivorship Definition
The right of survivorship refers to the legal right held by a joint tenant, often a spouse, to claim real or personal property upon the death of a joint holder. The right of survivorship only applies to property held in joint tenancy or as community property with a right of survivorship. Given that the right of survivorship takes effect automatically upon the death of one of the joint tenants or spouses, the property does not form part of the decedent’s estate and is not subject to competing claims by other beneficiaries, heirs or creditors of the deceased. As such, it serves as an estate planning tool that allows for the transfer of property interests outside of probate. Notably, the right of survivorship is non-transferrable, ensuring that upon the death of the joint tenant, his or her ownership share will be equally distributed to the remaining tenants.
What are joint tenants with right of survivorship?
As mentioned above, the right of survivorship only exists where there is a joint tenancy or survivorship community property. Joint tenancy refers to the co-ownership of real or personal property, such as a house or money in a joint bank account, by one or more persons. To create a joint tenancy, the tenants must become equal owners of the property simultaneously and in a similar manner. Joint tenancy can be created by the transfer of property, deed, or will, and co-owners of property can choose at any time to convert their ownership to a joint tenancy by amending the property title.
The right of survivorship is a key characteristic of joint tenancy as it allows the co-owners to shield their property from the probate process until the last surviving tenant assumes complete ownership. A straightforward example of joint tenancy is a married couple that holds the title to their house as such. Because a joint tenancy and the associated right of survivorship continue to be legally binding as long as one of the tenants is alive, this form of ownership guarantees that the right to their co-owned property will automatically pass to the surviving spouse upon the death of one spouse. The only thing the surviving spouse must do is assert his or her right of survivorship by filing paperwork to clear title. Should the couple divorce, the joint tenancy and concomitant right of survivorship will generally cease to exist.
Furthermore, as long as a joint tenancy remains effective, the right of survivorship is non-transferrable. This means that where there are more than two joint tenants, only the surviving tenants may assume ownership. It is only the last surviving tenant that acquires the right to transfer complete ownership to someone else.
What is a right of survivorship deed?
A survivorship deed is a document pursuant to which parties in a joint tenancy set forth the terms by which the transfer of their property interest will occur upon death. A survivorship deed must include a grantor and a grantee, there must be some form of consideration (often a minimal amount if the deed is between spouses), and it must be notarized. Some states also require that there be a witness to the deed.
A survivorship deed ensures that the grantee assumes complete ownership of the property upon the death of the grantor without needing to pass through probate, essentially clarifying the right of survivorship in a legally-binding, written contract. It is common for spouses who are joint tenants to create a survivorship deed so as to protect the surviving spouse from needing to go through the probate process.
In order for a survivorship deed to remain effective, the property must continue to be held under joint tenancy. Thus, where a joint tenancy and the accompanying right of survivorship no longer exists, a survivorship deed will no longer be enforceable.
There are various ways one can draft a survivorship deed, the most common being quitclaim deeds and warranty deeds. A quitclaim deed is a deed pursuant to which one person relinquishes his or her property interest. A quitclaim deed does not provide extensive protections to the grantee and, as such, is often used by family members or individuals who have established trust between each other. In contrast, a warranty deed provides more extensive protections tp the grantee, such as assuring that the property being transferred is free of liens.
What is community property with right of survivorship?
Community property with right of survivorship, or survivorship community property, is an alternative to joint tenancy or tenancy-by-the-entirety. (Note: in states that uphold community property with the right of survivorship, e.g. California, Nevada, Arizona, tenancy-by-the-entirety is not a permissible form of ownership between spouses.) Survivorship community property functions similar to a joint tenancy between spouses in that it ensures that the surviving spouse automatically assumes complete ownership of community property upon their spouse’s death, without needing to pass through probate. This transfer of ownership is simple, generally requiring only that the surviving spouse fill out a form and submit it, along with a death certificate, to the institution that records the relevant ownership.
It is possible for co-owners of community property that live in a state which upholds community property with the right of survivorship, to amend the right of survivorship. For example, a spouse may choose to transfer his or her share of ownership to a child as opposed to the surviving spouse. In this case, the spouses must update the title to the community property and exclude the right of survivorship, thereby allowing a spouse to leave his or her share via a will to the child.
Similarly, not all property held by individuals that are married is classified as community property. Property that one spouse owned prior to marriage, for example, is not community property and would therefore not transfer automatically to the surviving spouse unless the decedent specifically included a right of survivorship. All of the things that go into determining whether property is community or separate are beyond the scope of this article.
What are the tax implications?
Taxes due on gains from the sale of property will depend on the type of ownership that was in place upon the decedent’s death. In the case of property held under joint tenancy, the fair market value of the property at the time of the decedent’s death will be used as the basis value of the property. Thus, a surviving tenant will hold his or her original ownership interest based on the initial property value, plus an inherited interest calculated on a step-up basis.
In contrast, where property is held as community property with right of survivorship, the value of both shares will be stepped up. Thus, the fair market value of the property at the time of death will apply to both the surviving spouse’s share and the inherited share. Given that community property with right of survivorship bypasses probate, the cost burden to the surviving spouse is thereby minimized – he or she will owe taxes only on the difference between the sale price and the fair market value at the time of death. Moreover, the surviving spouse may not be liable for any income tax at all if the property is his/her personal residence.
Estate taxes may also be imposed on any newly acquired interest in property, even where the right of survivorship exists. The application of estate taxes, however, depends on the value of the property. While estate taxes may be costly, however, the value of the new ownership interest will likely outweigh the burden of such obligations.
Can the right of survivorship be challenged?
Yes, where it is not accurately set forth or an error exists in the way the documentation was drafted, it may be possible to challenge a right of survivorship. Where the documentation is properly drafted, the person challenging the right of survivorship bears the burden of proof. Given that the right of survivorship prevails over wills and other contracts, it is very difficult to challenge. However, the right of survivorship must be clearly and precisely stated in the relevant documentation (e.g., contract, deed or title).
It is also worth noting that in the case of a joint tenancy, if one tenant sells his or her share of the property, the new owner of that interest does not automatically assume the right of survivorship held by the original owner. Instead the new owner would be classified as a tenant-in-common, which does not carry the right of survivorship. Thus, the original owners continue as joint tenants, the buyer is deemed a tenant-in-common, and when only one original owner remains alongside the buyer, they will hold the property as tenants-in-common.
Can I contest a joint account with right of survivorship?
Yes. In the case of a joint account with right of survivorship, the right must be clearly documented. Where it is unclear whether the right of survivorship was intended to be attached to a joint account, evidence of joint use must exist. If this is not the case, and there is no issue with the relevant documentation, someone may be able to contest the right of survivorship by showing that the surviving account holder never used the account, e.g., deposited funds into the account. In a case like this, the court may find that the joint account was not in fact a joint tenancy, leaving the funds therein to be distributed in accordance with the will of the deceased (or applicable intestate laws).
Can I contest a house deed with right of survivorship?
Yes. However as stated above, it is very difficult to challenge the right of survivorship. In the case of a house deed with the right of survivorship, the right of survivorship will prevail over last wills and testaments as well as other [subsequent] contracts that may contradict the right. That is, a property owner who promises to bequeath property in a manner inconsistent with the right of survivorship must update the house deed as such. While it may be possible to sue to enforce the competing contract, the right of survivorship is difficult to overcome absent an error in the relevant documentation.
Right of Survivorship vs. Will
As previously discussed, the right of survivorship prevails over last wills and testaments. This is because property with the right of survivorship is exempt from probate and does not form part of the decedent’s estate. However, where the surviving tenant is the last remaining owner of the property, the property will be deemed part of their estate and transferred in accordance with their will.
Right of Survivorship vs. Transfer on Death
Like a joint tenancy with right of survivorship and survivorship community property, a transfer on death deed is an estate planning tool used to bypass probate when transferring property to a beneficiary. It is a revocable deed that allows an individual in California to transfer a specific type of real property, e.g., real property improved with not less than one nor more than four residential dwelling units or a condo unit. A transfer on death deed is an alternative to a joint tenancy with right of survivorship, and may be simpler or less costly depending on the property owner’s circumstances. In any case, a joint tenancy with right of survivorship will trump a transfer on death deed unless the last surviving joint tenant holds the transfer on death deed.
When should I contact an estate planning attorney?
You should consider an estate planning attorney anytime you need to ensure that your property and/or estate documentation is prepared exactly as you wish. Furthermore, while clearing title to property transferred via the right of survivorship may be straightforward, you might consider contacting an estate planning attorney to make sure the transfer is performed correctly. In some instances, title may not be cleared correctly the first time an interest is transferred, leaving a more complicated situation for the transfer of title when the second tenant dies. In addition, you should contact an estate litigation attorney anytime you feel a joint account was not in fact a joint tenancy or where you feel the relevant documentation was drafted incorrectly.
Do I need an estate litigation attorney near me?
We recommend finding an experienced estate litigation attorney familiar with the county probate court in the county where the real estate property is located. For example, if the property is located in Los Angeles, we recommend working with an estate litigation lawyer in Los Angeles. A Los Angeles estate litigation lawyer will generally be more familiar with the Los Angeles Superior Court Probate Division, versus an out of state attorney.
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About RMO Lawyers
RMO LLP provides personal and efficient inheritance dispute services to individual and institutional clients. The firm’s attorneys focus on probate litigation involving contested trust, estate, probate, and conservatorship matters. Serving California and Texas, with offices in Los Angeles, Pasadena, Orange County, San Diego, Fresno, the Bay Area, Dallas, and Houston. For more information, please visit https://rmolawyers.com/.