Right of Survivorship

What Is Right of Survivorship?

The right of survivorship is a legal characteristic of certain types of co-ownership of property, most notably joint tenancy. It dictates that when one co-owner dies, their interest in the property automatically passes to the surviving co-owner(s) without the need for probate. This feature is a key component in estate planning, allowing for a seamless transfer of assets and avoiding the potentially lengthy and costly probate process. The right of survivorship effectively bypasses a deceased owner's last will and testament for that specific asset, ensuring the property's title rests with the remaining owner(s).

History and Origin

The concept of the right of survivorship is deeply rooted in English common law, particularly associated with joint tenancy and tenancy by the entirety. These forms of property ownership emerged within the feudal system, where land tenure often favored the uninterrupted continuation of ownership. Originally, the common law preference for joint tenancies meant that a grant of land to multiple individuals, without specifying otherwise, would default to a form of ownership that included the right of survivorship. This legal principle was designed to ensure that property, particularly real estate, remained intact rather than being fragmented among various heirs through inheritance. The right of survivorship has been recognized by statute in all U.S. states and remains a powerful legal right that takes precedence over other claims upon the property.¹⁵

Key Takeaways

• The right of survivorship automatically transfers a deceased co-owner's interest in property to the surviving co-owner(s).
• It is a distinguishing feature of specific co-ownership types, primarily joint tenancy and tenancy by the entirety.
• This mechanism allows assets to bypass the probate process, potentially saving time and legal expenses.
• The right of survivorship overrides provisions in a deceased owner's will for the jointly held asset.
• While offering simplicity, it can lead to unintended consequences regarding asset distribution and control.

Interpreting the Right of Survivorship

When property is held with the right of survivorship, it means that each co-owner possesses an undivided interest in the entire estate. Upon the death of one co-owner, their interest does not pass to their heirs or beneficiaries via a will but vanishes, and the shares of the surviving co-owner(s) proportionately expand to encompass the entire estate. This immediate transfer is a core aspect of its appeal in asset protection and simplified estate management. Understanding this mechanism is crucial for anyone engaging in joint real estate or other asset ownership.¹⁴

Hypothetical Example

Consider John and Jane, an unmarried couple, who decide to purchase a vacation home together. To ensure that if one of them passes away, the other automatically inherits the full property without any delays or legal complications, they decide to hold the title to the home as joint tenants with the right of survivorship.

Several years later, John unexpectedly passes away. Because the property was held with the right of survivorship, John's interest in the vacation home automatically transfers to Jane. Jane becomes the sole owner of the property by operation of law, merely needing to record John's death certificate to update the deed. The home does not go through probate as part of John's estate, and his separate will, which might have directed his share of the home to another beneficiary, is bypassed concerning this specific asset.

Practical Applications

The right of survivorship is widely applied in various contexts, particularly within estate planning and for holding property ownership. Its primary advantage lies in its ability to facilitate the direct and automatic transfer of assets upon a co-owner's death, bypassing the often time-consuming and costly probate process.¹³

Common applications include:

• Marital Property: Spouses frequently utilize joint tenancy with the right of survivorship for their homes, bank accounts, and investment accounts to ensure that the surviving spouse automatically inherits the asset.
• Family Holdings: Parents may add an adult child as a joint tenant to a bank account or real estate to simplify asset transfer upon their death, though this has potential downsides.
• Business Partnerships (limited cases): While less common for operating businesses due to control issues, specific assets within a partnership might be held with survivorship rights for certain arrangements, though partnerships typically have their own succession plans.
• Gift Planning: Using the right of survivorship can be part of a broader gifting strategy, as adding a joint owner can be considered a gift for tax purposes.¹²

For U.S. estate tax purposes, the Internal Revenue Service (IRS) generally applies a "consideration furnished" rule for jointly held property, meaning the entire value of the property is included in the deceased owner's estate unless the survivor can prove their contribution to its acquisition. For married U.S. citizens, a "qualified joint interest" rule often applies, where only half of the property's value is included in the deceased spouse's estate, regardless of contribution.¹¹ Further information on estate tax implications, including jointly held property, can be found on the IRS website.¹⁰

Limitations and Criticisms

Despite its simplicity and probate-avoidance benefits, the right of survivorship has several limitations and potential criticisms:

• Loss of Control: Once a property is held with the right of survivorship, all joint owners have equal rights, meaning decisions regarding the property, such as selling or mortgaging, generally require collective agreement. This can lead to conflicts if owners have differing opinions.⁹
• Unintended Disinheritance: Assets held with the right of survivorship pass automatically to the surviving owner(s), overriding any instructions in a deceased owner's last will and testament. This can unintentionally disinherit other intended heirs or beneficiary in the will.⁸
• Exposure to Creditors: If one joint owner incurs significant debt or faces legal action, their share of the jointly owned property may be subject to creditors' claims, potentially jeopardizing the entire asset.⁷
• Gift Tax Implications: Adding a joint owner to an asset, especially if it's not a spouse, can be considered a taxable gift if the value exceeds the annual gift tax exclusion amount.⁶
• Tax Basis Issues: In some cases, holding property with the right of survivorship may affect the "step-up in basis" at death, potentially leading to higher capital gains taxes if the property is later sold by the survivor, though for married couples, a step-up for half the property's value is common.⁵
• Complexity with Multiple Deaths: While avoiding probate at the first death, if all joint owners die simultaneously or the last surviving owner does not update the title, the asset may still enter probate.⁴

These drawbacks highlight the importance of carefully considering the implications of the right of survivorship within a comprehensive estate planning strategy. The American Bar Association provides additional insights into the complexities of joint property ownership.³

Right of Survivorship vs. Tenancy in Common

The fundamental difference between property held with a right of survivorship (as in joint tenancy or tenancy by the entirety) and tenancy in common lies in what happens to a deceased owner's share.

In a right of survivorship arrangement, the deceased co-owner's interest automatically passes to the surviving co-owner(s). This transfer occurs outside of probate, and the deceased's will has no control over this specific asset. Each owner typically has an equal share, and the "four unities" (unity of time, title, interest, and possession) are generally required for its creation.²

Conversely, with tenancy in common, there is no right of survivorship. When a tenant in common dies, their share of the property does not automatically transfer to the other co-owner(s). Instead, their interest becomes part of their estate and is distributed according to their last will and testament or, if no will exists, by the laws of intestate succession. Tenants in common can hold unequal shares of ownership, and the unities are not strictly required, allowing for more flexibility in ownership structure. This distinction is critical for how assets are transferred and for the deceased's estate's overall administration.

FAQs

What types of property ownership include the right of survivorship?

The most common types of property ownership that include the right of survivorship are joint tenancy and tenancy by the entirety. Some jurisdictions may also recognize community property with right of survivorship.

Does the right of survivorship avoid all taxes?

No, the right of survivorship primarily avoids the probate process, which can save on probate fees and time. However, it does not necessarily avoid estate taxes or gift taxes. The specific tax implications depend on the relationship between the co-owners (e.g., spouses vs. non-spouses) and the value of the estate, as regulated by the IRS.

Can a will override the right of survivorship?

No. The right of survivorship takes precedence over a last will and testament for the specific asset held in co-ownership. If an asset is held with the right of survivorship, it will automatically pass to the surviving co-owner(s) regardless of what the deceased's will specifies.

Can the right of survivorship be terminated?

Yes, the right of survivorship can be terminated or "severed" in various ways, depending on the type of co-ownership and jurisdiction. For example, a joint tenancy can often be severed by one joint tenant conveying their interest to another party, converting it into a tenancy in common. In the case of tenancy by the entirety (often for married couples), severance typically requires mutual agreement or a divorce.¹

Is the right of survivorship suitable for all assets?

While commonly used for real estate and financial accounts, the suitability of the right of survivorship depends on individual circumstances, estate planning goals, and potential tax consequences. It can offer simplicity, but it may also lead to a loss of control or unintended distribution outcomes. Consulting with an estate planning professional is advisable for complex situations.