Right of Survivorship Deed
As discussed in How to Avoid Probate, the key to avoiding probate is to arrange your assets so assets so everything you own either passes automatically to someone at your death or can be transferred without court involvement.
One way to avoid probate is to simply transfer the property to someone else. For example, you may transfer a timeshare or vacation home to your children, retaining no ownership interest. A lifetime gift of the entire property removes the property from your probate estate. Because you do not own the property at your death, there is no need to probate your estate to transfer the property.
Outright transfers involve a complete loss of control and use of the property. Most people do not want to give their property away while they are still alive. And there may also be income tax and gift tax consequences associated with outright transfers.
To avoid the drawbacks of transferring the entire property, many property owners prefer to add someone to the title to the property. If done correctly, adding someone to the title can avoid probate. The key to making it work is to ensure that the property is titled with right of survivorship.
As discussed below, although adding someone to a deed with right of survivorship does involve probate, a transfer-on-death (TOD) deed or lady bird deed is usually a better alternative. Both TOD deeds and lady bird deeds avoid probate at death without transferring ownership of the property during life. This allows the property to owner to avoid probate at death without sacrificing control over any portion of the property during life.
What is a Right of Survivorship?
A right of survivorship is a right given to one owner to inherit property on another owner’s death.
As the definition implies, a right of survivorship requires at least two owners. If there is only one owner, then there is no other owner that can hold the right to acquire the property at that owner’s death.
A right of survivorship also requires human owners (often called natural persons in legal material). Only humans have a life span that can trigger the right of survivorship. You cannot hold title with right of survivorship if the other owner is an LLC, trust, or some other owner that is not a human.
What Happens on an Owner’s Death When Property is Held with Right of Survivorship?
When property is held with right of survivorship and an owner dies, the property passes to the surviving owner. Although this transfer happens automatically as a matter of law, the surviving owner may wish to remove the deceased owner from title to the property. As described in How to Remove a Deceased Owner from a Title Deed to Real Estate, filing a survivorship affidavit in the land records removes the deceased owner from the title.
What is a Survivorship Deed?
Technically, there is no such thing as a right of survivorship deed or survivorship deed. A right of survivorship is a form of co-ownership, not a type of deed. Deeds are usually named after the warranty of title that they provide. When people refer to a right of survivorship deed, they are usually referring to property that is held in one of the forms of co-ownership that include a right of survivorship.
Some states—notably Ohio—use the term survivorship deed in the statutes, creating a conflict between other statutes that name the deed after the warranty of title. These conflicts can often be avoided by naming the deed after the warranty of title and using the term survivorship deed as a secondary title. In most states, though, it is best to simply name the deed after the warranty of title.
What Forms of Co-Ownership Include Right of Survivorship?
Three types of deeds include a right of survivorship: Joint tenancy with right of survivorship; tenancy by the entirety; and community property with right of survivorship.
- Joint Tenancy with Right of Survivorship. A joint tenancy with right of survivorship is a common form of co-ownership in which each owner has a right of survivorship with respect to the other owners. On the death of an owner, the property passes automatically to the surviving owners. The last living owner inherits the entire property.
- Tenancy by the Entirety. Tenancy by the entirety is a form of joint tenancy that applies only to married couples. Neither spouse may convey the property without the other spouse’s consent. On the death of one spouse, the property passes automatically to the surviving spouse. Tenancy by the entirety is recognized in many—but not all—U.S. states.
- Community Property with Right of Survivorship. Nine U.S. states treat a husband and wife as a single economic unit under a system of community property law. In these states—which include Texas, California, Washington, and Arizona—spouses can hold title as community property with right of survivorship. This form of marital ownership allows the property to pass to the surviving spouse on the death of the first spouse to die.
How Do I Create a Right of Survivorship?
A right of survivorship is created by special language in the deed. In the case of joint tenancy with right of survivorship, the deed may list the owners and state that the property is held as joint tenants with right of survivorship. Similarly, a deed to a married couple as community property with right of survivorship may state that the property is held as community property with right of survivorship.
Some states require a separate survivorship agreement (in addition to language in the deed) to create the right of survivorship. For example, a separate marital property agreement or community property agreement is used in Texas to create survivorship rights. These related agreements are filed with the deed in the county land records to clarify that the property passes to the surviving owners on an owner’s death.
Tenancy by the entirety differs from other right-of-survivorship deeds. In states that recognize tenancy by the entirety, the law presumes that the property owned by a married couple will be held as tenancy by the entirety. Any indication that the parties are married is usually enough to create the tenancy by the entirety.
What if the Deed Does Not Specify the Form of Co-Ownership?
In most states, a deed to multiple owners (other than spouses) that does not specify how the owners will hold title is presumed to be held with no right of survivorship under a form of co-ownership called tenancy in common. If property is held as tenancy in common, each owner’s interest passes to his or her probate estate upon his or her death. Probate is usually required to transfer property held as tenancy in common.
What are the Problems with Right of Survivorship Deeds?
Although deeds that create a right of survivorship can be useful probate avoidance tools, there are limitations to consider:
- When you add someone to title to real estate with a right of survivorship, you are transferring a real economic interest to them. They become new owners of the property with the same rights that you have. You won’t be able to sell or mortgage the property without their consent, nor will you be able to stop them from transferring their interest to someone else.
- The creditors of a joint tenant may seize the joint tenant’s interest in the property. For example, if the person you add to the title later declares bankruptcy, the interest you transferred may be an asset of the bankruptcy estate.
- A right of survivorship does not avoid probate as much as delay it. The last surviving owner will own the entire property, and it will be included in his or her probate estate. Unless the last surviving owner takes further steps to avoid probate, probate will be required on the death of the last surviving owner.
- The lifetime transfer of an interest in the property may have bad tax consequences. The gift of an interest in the property may require filing a gift tax return. The lifetime gift may also forfeit a stepped-up basis, resulting in more capital gain taxes when the property is eventually sold.