Estate planning isn’t just for the wealthy or elderly. It’s an essential act of love and responsibility for anyone who wants to make life easier for their loved ones when the unexpected happens. At PayneLess Law, we’ve witnessed firsthand how preparing for the future can protect families from unnecessary stress. One important option in Arizona’s estate planning toolkit is Joint Tenancy with Right of Survivorship (JTWROS).

This legal arrangement, governed by Arizona Revised Statutes (ARS) Title 33, allows property to pass seamlessly to a surviving joint tenant without the need for probate. Let’s explore how it works, its benefits, and potential drawbacks, so you can decide whether it’s the right fit for your situation.

What is Joint Tenancy with Right of Survivorship?

Joint Tenancy with Right of Survivorship, often called JTWROS, is a way for two or more people to own property together. The key feature is what happens when one owner dies: their share automatically goes to the remaining owner(s). This skips the probate process, which saves both time and money.

Imagine a married couple, Jane and Mike, who own a home together as joint tenants. If Jane passes away, her share of the home automatically goes to Mike, bypassing probate court and her will. Instead, Mike becomes the sole owner of the property instantly. This  convenience can bring peace of mind to couples, family members, or even business partners who want a straightforward way to ensure property transitions smoothly.

How Do You Establish JTWROS in Arizona?

To create a valid JTWROS in Arizona, you need to meet specific requirements known as the four unities:

1. Unity of Time: All owners must acquire their interest at the same time.
2. Unity of Title: Ownership must be established through the same document, like a deed.
3. Unity of Interest: Each owner must have an equal share. For instance, two owners each hold 50%, while three would each hold 33.33%.
4. Unity of Possession: All owners have the right to use and enjoy the entire property, not just a specific portion.

Here’s an example: If three siblings purchase a vacation home together and want JTWROS, they’d need to ensure the deed explicitly states this arrangement and that the purchase meets the above requirements .

Benefits of Joint Tenancy in Arizona

There are some clear advantages to JTWROS, making it a popular choice for estate planning:

1. Avoids Probate

The primary benefit of JTWROS is skipping probate. Probate can be a lengthy, expensive process, but with JTWROS, the property passes directly to the surviving owner(s).

2. Simplicity

Unlike some estate planning tools, JTWROS is relatively easy to establish. Once the property is titled correctly, the arrangement works automatically upon an owner’s passing.

3. Step-Up in Basis

For tax purposes, the surviving joint tenant often benefits from a step-up in basis. This means the property’s value is updated to its current market value at the time of the owner’s death. This can lower capital gains taxes if the property is sold later.

4. Control During Life

While alive, all joint tenants share equal ownership and control, which can foster collaboration and shared decision-making.

Potential Drawbacks of Joint Tenancy in Arizona

While JTWROS has its perks, it’s not without its challenges. Here are some key considerations:

1. Loss of Full Control

Adding someone as a joint tenant means they immediately gain ownership rights. This could lead to complications like the new owner deciding to sell their share or using it as collateral for loans.

2. Creditor Risks

If one joint tenant runs into financial trouble, their creditors can claim a share of the property. This might cause unexpected problems for the other joint tenants.

3. Gift Tax Concerns

Adding someone as a joint tenant to your property could lead to gift tax issues, especially if the property’s value exceeds the annual tax-free limit.

4. Estate Planning Limitations

Since the property automatically transfers to the surviving tenant(s), it won’t be distributed according to a will. This setup could unintentionally disinherit other heirs.

Can Joint Tenancy Be Changed?

Yes, but altering or terminating JTWROS isn’t always simple. Here are a few ways it can be done:

• Selling an Interest: If one joint tenant sells or transfers their share, the JTWROS is broken, and the new ownership becomes a tenancy in common.
• Transferring to a Trust: Placing property into a trust can sever the joint tenancy while still allowing for comprehensive estate planning.
• Partition Action: A court can order the division or sale of the property if the joint tenants disagree.

Alternatives to Joint Tenancy

If JTWROS doesn’t feel like the right fit, there are other ways to achieve similar goals:

• Revocable Living Trusts: These offer flexibility, control, and probate avoidance, making them a popular choice for many Arizonans.
• Transfer-on-Death (TOD) Deeds: TOD deeds allow real estate to pass directly to a beneficiary without probate.
• Beneficiary Designations: For financial accounts or insurance policies, naming beneficiaries is another straightforward option.

Ready to Plan for the Future?

At PayneLess Law, we understand how overwhelming estate planning can seem. That’s why we’re here to guide you through the process with compassion and clarity. If you’re considering joint tenancy or other estate planning tools in Arizona, reach out today. Together, we’ll create a plan that reflects your love and care for your family while securing their future. Contact us at 480-420-7199 or visit our website to schedule a consultation.