Are You Buying a Home With Another Buyer?

If you buy a home with someone else – whether that person is your spouse or another relative or friend – you’ll have to decide if you both hold equal rights to the property and what happens if one of you passes away. You should have the advice and insights of a Texas real estate lawyer.

What happens to a home when one of the owners dies? Does the survivor automatically receive the decedent’s share of the home? What is joint tenancy with the right of survivorship in Texas, and how does it affect the distribution of jointly-owned property after a co-owner’s death?

If you are concerned about what may happen to your jointly-owned property if one of the owners passes away, schedule a consultation with a Texas real estate attorney who will address your concerns, explain your options, and provide the answers and insights you may need.

What is the Right of Survivorship?

In the State of Texas, the right of survivorship is the right of a surviving tenant to receive a decedent’s share of a jointly-owned property automatically, without having to submit the property to the probate process.

The right of survivorship lets you transfer your share of jointly-owned property to your loved ones easily upon your death. One practical way to protect a jointly-owned property is to have a Texas real estate lawyer prepare a joint tenancy with the right of survivorship agreement.

This agreement will allow the property to transfer automatically to the surviving owner after the other owner’s death, without probate court interference. Your Texas real estate attorney will ensure that the necessary legal documents are prepared properly and comply with Texas law.

What Are the Advantages of Joint Tenancy With Right of Survivorship?

Avoiding the probate process is one of the important benefits of joint tenancy with the right of survivorship, but it’s not the only advantage. Other benefits include:

  1.  Continuing tenancy: Continuing tenancy prevents your co-owner from leaving his or her share of the property to a third party.
  2.  Divided ownership: Divided ownership gives each owner an equal share of the property as well as responsibility for an equal share of the mortgage payments and taxes.

What Are the Disadvantages of Joint Tenancy With Right of Survivorship?

However, joint tenancy with the right of survivorship may not always be the right option for homebuyers. What’s right for you depends on your unique family and financial situation. Joint tenancy with the right of survivorship may also entail some potential disadvantages, including:

  1.  The invalidity of a co-owner’s will provision related to the house, and disregard for a co-owner’s heirs: Owners can’t leave their ownership portion to their heirs through a will since the other document would trump the Will. In order to transfer your share of a co-owned home to a third-party heir, you’ll need a different ownership agreement.
  2.  Shared financial responsibility: All co-owners of a property are equally responsible for mortgage payments. If a co-owner can’t pay, the other owner or co-owners must make up the difference, potentially burdening the other owner or co-owners financially.
  3.  Partnerships may fail: If your relationship with your co-owner goes south, the property may only be sold if both owners agree. In fact, unless your co-owner agrees, you cannot initiate a refinance or take any advantage of your equity in the property.

What Are the Tax Implications of Joint Tenancy With Right of Survivorship?

The tax implications of joint tenancy with right of survivorship agreements depend on whether a property’s co-owners are married. If you buy a property with your spouse in this arrangement, you generally won’t have to pay capital gains taxes if you should sell the home after your spouse’s death since under Texas community property laws and IRS provisions presently, there’s generally a step up in cost basis at death. However, if it’s separate property or you live in a different state, then the tax consequences could potentially be different.

What is a Tenants in Common Agreement?

While a few people who purchase a home together in Texas choose joint tenancy with the right of survivorship, that’s not the only option for co-owners. Another option for people who are jointly buying property together is a “tenants in common” agreement. Tenants in common is the default, and I’ve only seen a handful of people buy a home as JTWROS.

This arrangement includes many of the benefits of the joint tenancy with the right of survivorship option, and it gives co-owners additional freedoms. The tenants in common option is popular in this state with co-owners who are not married.

Under a tenants in common arrangement, co-owners may hold unequal shares of a property. One owner may hold 80 percent while the other has only a 20 percent share. Co-owners with a tenants in common agreement have the right to transfer or sell their shares as they please and may leave their share of the property to their heirs through a last will and testament.

What Else Should Homebuyers Know?

The way that homeowners in Texas purchase a home together will determine what happens to the property when a co-owner passes away. The arrangement you choose also could have implications for your mortgage loan.

That’s why you should discuss joint tenancy with the right of survivorship, tenants in common, and your other home ownership options with a real estate attorney and mortgage lender before you begin the home-buying process or sign any real estate documents.

How Can You Find the Right Real Estate Attorney?

Real estate deeds rely on precise language and specific details. Accuracy matters. Let a real estate attorney at Mike Massey Law assist you with a title or a deed, answer your legal questions, and ensure that no problems with a deed or title emerge in the future.

Attorney Mike Massey is a Texas estate planning and real estate attorney who represents clients throughout the State of Texas. He leads a team of attorneys who have established a reputation for outstanding client service and legal excellence.

Before you buy a home, have your questions about your ownership options answered by calling Mike Massey Law at 512-400-4430 (in the Austin area) or 713-489-7360 (in the Houston area). Mike Massey Law offers an initial evaluation of your legal needs without cost or obligation.