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Marriage. Most co-ownership is a result of marriage. Married couples usually buy and own stuff jointly. When married couples buy things together, they are presumed to own the property as joint tenants . Property that is owned separately before marriage generally remains that way after the marriage . That means if you own a boat or house before you get married, the fact that you got married doesn’t automatically convert the asset to joint ownership. However, if the other spouse starts making the boat or house payments, they may build a co-ownership interest. You may have heard the term community property . Basically this is a form of property ownership specifically for married couples meaning that the property is owned by the community of the married couple . Nine states, mainly western states, are community property states. Community property has no right of survivorship. Couples must add “with right of survivorship” to a deed or other title document if they want the property to transfer automatically to the surviving spouse. Inheritance. Many people find themselves in a co-ownership relationship with one or more people because they have inherited an interest in a property . For example, a grandmother may leave her house to all of her grandchildren after she dies. They will be co-owners of the property and inherit as tenants-in-common . III. Pitfalls of Joint Tenancy Successful co-ownership requires negotiating and agreeing on the details of ownership before buying the thing you will share. If there is no written agreement designating who owns what percentage and indicating a clear intention to own the thing as tenants-in-common, it is usually presumed that the thing is owned as joint tenants . This can be a problem because of the many pitfalls of joint tenancy : Survivorship. Many people are unaware that if you own property as a joint tenant, you cannot choose to have that property pass to anyone other than the other joint tenant(s) when you die . If you want to be able to leave your share to someone outside of the joint tenant co-ownership circle, you must own the asset as a tenant-in-common. Bank Accounts. Sharing a bank account with another person is particularly risky because bank accounts are held as joint tenancies. Any account holder has access to the account and the right to withdraw all of the money at any time . There are plenty of stories of scammers, angry spouses, or business partners draining a joint bank account, never to be heard from again. Only share bank accounts with people you know very well and trust very deeply. As a precaution, keep the balance low or talk with your bank about restricting access to the account. Sale or Encumbrance. Another pitfall of joint tenancy is that generally, a joint tenant can’t sell an asset without the agreement of all of the other joint tenants . In some situations, particularly if the joint tenants have a testy relationship, such as during a divorce, getting everyone to agree on disposition of an asset can be difficult. In the case of a home, for example, one owner may want to sell because they think the market is hot and they can get a good price, while another disagrees thinking that they can get a better price if they wait. The joint tenant who wants to sell may be out of luck unless they can get the other to agree. Exposure to Loss. Recall that one of the key features of joint tenancy is that each person has an equal and undivided interest in an asset . This “equal and undivided interest” creates a gigantic pit to fall into. PRODUCT PREVIEW
Chapter 16 | Share with Care! 312
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