Can a trust be a joint tenant or tenant in common?
What is joint tenancy and tenancy in common?
Joint tenancy and tenancy in common are two different ways of being co-owners of property. Each form of ownership comes with different rights.
Joint tenancy is technically called “joint tenancy with right of survivorship.” As it turns out, the phrase “right of survivorship” is helpful for understanding what joint tenancy is all about. If you own property as joint tenants with someone else, then whoever dies first immediately transfers their ownership interest to the survivor. In other words, the person that lives the longest gets to own the property outright.
Consider the following example: Amelia and Benjamin own some real estate called Blackacre as joint tenants with right of survivorship. While both are still alive, they both have equal right to the property. However, Benjamin dies one day. When he dies, Amelia immediately becomes the sole owner of Blackacre. This occurs regardless of what Benjamin said in his will; the transfer takes place outside the probate system. However, had Amelia died first, then Benjamin would have owned Blackacre outright. This is how joint tenancy works.
Tenancy in common means that each co-owner of the property owns an individual share that does not automatically transfer to the other co-owner at death. Instead, a tenant in common can leave their share of the property to whomever they wish. In other words, the person that lives the longest does not necessarily get any additional property rights.
Consider the following example: Charlie and Destiny own Blackacre as tenants in common. This means that they both have a right to the property. Destiny dies one day, and in her will she left everything to her daughter Evelyn. The property goes through the probate system and eventually Evelyn is given Destiny’s share in the property. Now Charlie and Evelyn own the property as tenants in common. And when Charlie dies, he can leave his share to whomever he wants.
Can a trust be a joint tenant with right of survivorship?
No, a trust probably cannot be a joint tenant with right of survivorship. Only natural persons may be a joint tenant in Florida because the right of survivorship implies that the tenants can die. Thus, because a trust cannot die, it likely cannot be a joint tenant.
This makes a lot of sense if you think about it. A joint tenancy is meant to end when one of the joint tenants dies. But a trust does not die the way a natural person does. Because of this, it does not make sense to allow a trust to own property in this manner.
So what happens if you try to transfer jointly held property into a trust? The joint tenancy is severed, meaning it turns into a tenancy in common. The automatic transfer at death is lost the moment the joint tenancy is severed.
However, property held inside of a revocable living trust with multiple settlors can behave just like joint tenancy with right of survivorship. The key is to draft the language of the trust to state that the surviving settlor own all the property in the trust. By doing this, the trust treats all property inside of the trust as if it were owned in a joint tenancy.
Can a trust be a tenant in common?
A trust can hold property as a tenant in common. Because property interests held in a tenancy in common do not automatically transfer at death, there is no problem with having the interests held by fictional legal entities, such an LLC, corporation, or trust.
If a trust holds a property interest as a tenant in common, then the property will transfer according to the dictates of the trust. This means that the interest can avoid the probate system by putting it into a properly-drafted trust. If the property interest is held in trust, the terms of the trust will override any will held by the settlor.
Should I move my property into trust if it is held as joint tenants or tenants in common?
Whether you should move your property into trust will depend on your unique situation and goals. Some people benefit greatly from moving a property interest into trust, but others do great harm. In addition, you should be careful when making any transfers to make sure you do it correctly. For all these reasons, you should speak with a trust attorney before making any final decisions. Often, you can even get a free consultation with a lawyer. It is important to get a licensed professional involved before messing around with the legal title to your property.