# Joint Property Ownership: Definitions, Functions, Risks Explained

## What Is Joint-Owned Property?

Joint-owned property is any property that's held in the name of two or more parties, such as spouses, business partners, family members, or friends. It can be held in several legal forms, including joint tenancy, tenancy by the entirety, [community property](https://www.investopedia.com/personal-finance/which-states-are-community-property-states/), or in trust.

Joint-ownership can offer practical benefits, such as avoiding probate and simplifying asset distribution upon death, but it may also pose risks if one party wishes to sell their share.

### Key Takeaways

*   Joint-owned property involves two or more people holding title, including spouses, business partners, or family members.
*   Joint tenancy allows for equal rights and obligations, with the property passing to survivors without probate.
*   Tenancy by the entirety is exclusive to spouses, ensuring full title passes automatically to the surviving spouse.
*   Adding a person's name to property for estate planning can risk financial exploitation, especially with elderly individuals.
*   Choosing the right form of joint ownership can avoid complications such as probate or legal disputes upon the death of an owner.

## Understanding the Mechanics of Joint-Owned Property

A joint-owned property can be held as a [joint tenancy](https://www.investopedia.com/terms/j/joint-tenancy.asp#:~:text=Joint%20tenancy%20is%20a%20form%20of%20property%20ownership,may%20be%20relatives%2C%20friends%2C%20or%20even%20business%20associates.). Two or more people have equal rights and obligations to the property they own together in this legal arrangement until one partner passes away.

The deceased owner's interest passes to the survivors without probate at this time. It's often referred to as a joint tenancy with rights of survivorship for this reason.

[Tenancy by the entirety](https://www.investopedia.com/terms/t/tenancy-by-the-entirety.asp#:~:text=Tenancy%20by%20the%20entirety%20is%20a%20form%20of,the%20title%20was%20received%20in%20both%20their%20names.) is another joint-owned property option that's reserved solely for spouses. Each spouse has an equal and undivided interest in the property. The full title of the property automatically passes to the surviving spouse if one spouse dies.

Two additional forms of jointly owned property also have distinct features: community property and trust property. A spouse can acquire community property during a marriage. This property legally belongs to both partners.

> **Important**
>
> U.S. states with community property laws include Arizona, California, Idaho, Louisiana, Nevada, Texas, Washington, and Wisconsin as of 2024. Five other states allow partners to opt into community property provisions: Alaska, South Dakota, Kentucky, Tennessee, and Florida.

Each spouse can claim half the total income, if any, that's earned from community property.

Individuals can also create a joint option in a living trust. Both would be grantors and trustees. They can place individually- or jointly-owned assets into these trusts. Either of them can dissolve the trust during their lifetime provided that it's not irrevocable.

Selecting the right form of joint property ownership can simplify the process when an owner dies. Joint tenancy is commonly used to avoid probate, which can be a lengthy, costly, and public process of distributing a deceased person's assets in court.

## Potential Pitfalls in Joint Ownership

Jointly owned property involves certain risks. People may add others to a property's title for estate planning to avoid attorney fees, but this can increase embezzlement risks.

An elderly person experiencing cognitive decline might add a friend or relative to a joint bank account. This person would gain full withdrawal rights. This action is typically final and can't be undone after an individual adds another’s name to the title of a piece of property, Certain exceptions that can be pursued through the courts, however, such as in circumstances of fraud or financial exploitation of those deemed to be legally incompetent.

## Does Property Automatically Become Community Property When People Get Married?

Yes, it generally does if it's acquired during the marriage. Premarital property or anything owned solely by one spouse before marriage doesn't become community property just because a marriage occurs unless some action is taken to make that happen.

Inheritances made to one spouse alone are typically considered to be individual, non-community property as well, even if they occur during the marriage. The exact rules can vary a little by state law, however.

## Is Tenancy in Common a Form of Joint-Owned Property?

A [tenancy in common](https://www.investopedia.com/terms/t/tenancy_in_common.asp#:~:text=Key%20Takeaways%201%20Tenancy%20in%20common%20%28TIC%29%20is,a%20named%20beneficiary%20upon%20their%20death.%20More%20items) is also a form of joint ownership but it doesn't carry rights of survivorship. Each owner retains the right to leave their share of the property to someone other than their co-owner in the event of their death. Shares of the property can be unequal as well. Party A might own 75% and Party B holds just 25%.

## What Is an Irrevocable Trust?

The grantor or creator of an irrevocable trust can't change its terms or undo it after it's been established and funded with money and assets. This includes adding or deleting beneficiaries or taking back property that's been placed into the trust.

[Irrevocable trusts](https://www.investopedia.com/terms/i/irrevocabletrust.asp) come with some advantages, however. The grantor is surrendering ownership when they place assets into the trust so they're immune from estate taxes and creditor claims, unlike revocable trusts.

## The Bottom Line

Joint-owned property is property owned by two or more people or entities. While it can offer benefits like avoiding probate and simplifying estate planning, it also carries risks, including financial complications and legal disputes if one party wishes to sell their share. Always consult a legal professional before entering a joint ownership arrangement, as dissolving it later can be complex and costly.

> **Article Sources**
>
> 1.  Cornell Law School Legal Information Institute. "[Joint Tenancy](https://www.law.cornell.edu/wex/joint_tenancy)."
>     
> 2.  Cornell Law School Legal Information Institute. "[Tenancy by the Entirety](https://www.law.cornell.edu/wex/tenancy_by_the_entirety)."
>     
> 3.  World Population Review. "[Community Property States 2024](https://worldpopulationreview.com/state-rankings/community-property-states)."
>     
> 4.  Louisiana Department of Justice. "[Louisiana's Community Property Law](https://www.ag.state.la.us/Files/Shared/Documents/MatrimonialRegimesandCovenantMarriageBooklet.pdf)." Page 2.
>     
> 5.  Cornell Law School Legal Information Institute. "[Tenancy in Common](https://www.law.cornell.edu/wex/tenancy_in_common)."
>     
> 6.  Cornell Law School Legal Information Institute. "[Irrevocable Trust](https://www.law.cornell.edu/wex/irrevocable_trust)."