FORMS OF CO-OWNERSHIP PROPERTY TITLING:
"Joint Tenants/Joint Tenants With Right of Survivorship" (JTWROS)
Example: "A and B, husband and wife, as Joint Tenants"
Equal interest co-ownership between any two or more persons (not just spouses) that carries an automatic right of survivorship; in other words, when one joint tenant dies, the surviving joint tenant(s) automatically own the deceased person's share. A joint tenancy interest cannot be willed to anyone, because your interest ceases at your death and passes automatically to the surviving joint tenant(s).
Note that when the last surviving person who was a joint tenant dies, there is no automatic survivorship right because there are no other joint tenants. The property passes to that person's heirs.
For real estate, if a joint tenant dies, it is necessary to prepare and record an "Affidavit of Death of Joint Tenant" along with a certified copy of the death certificate.
For property that has appreciated (gone up in value), the deceased person's interest receives a "stepped up" cost basis at death (to the extent he/she contributed to the acquisition cost of the property). That person's interest passes to the survivor(s) with a cost basis equal to its fair market value at the date of death. There is no change in the cost basis for the interest of the survivor(s). This stepped up cost basis can result in significant capital gains tax savings if the property is sold by the survivor(s).
Holding title to property as a joint tenant with someone means that the property could potentially be attached by the creditors of either of you.
"Tenants in Common"
Example: "A and B as tenants in common as to equal undivided interests"
Co-ownership that may be equal (50%/50%) or unequal (e.g., 70%/30%) between any two or more persons, with no right of survivorship. If one co-owner dies, her interest passes to her heirs by will, trust or intestacy. The surviving co-owners do not have any automatic right to the deceased person's interest.
The interest of a deceased tenant in common receives a stepped up basis equal to the fair market value of that person's share of the property as of the date of death, and that becomes the cost basis for that person's heirs should they later sell their interest in the property. The cost basis for the interests of the other co-owners remains unchanged.
Example: "A and B, husband and wife, as Community Property"
Equal co-ownership between spouses only (limited to community property states). No automatic right of survivorship unless one spouse dies intestate (without a will), in which case it all goes to the surviving spouse. Each spouse's half can be separately willed to anyone else, however. [Note: spouses who transfer property to their revocable living trust can continue to hold title as community property.]
For property that has appreciated in value, upon the death of one spouse the entire property (both spouses' interests) receives a full stepped-up cost basis as of the date of the first spouse's death. This allows the surviving spouse to sell the property and pay no federal capital gains tax on all of the appreciation up to the death of the first spouse.
NOTE: Always check with your attorney before deciding how to hold title. There are many factors to consider, and your personal needs and circumstances should be taken into account.