Q: My wife and I purchased a home over 40 years ago. The original deed is titled as John Smith and Sally Smith. This defaults to tenants in common in Georgia. Sally is my wife of over 50 years. We are now considering changing the title to John Smith and Sally Smith, joint tenants with right of survivorship.
Would this trigger any adverse consequences in our state? For example, would this invalidate the title insurance that we purchased 42 years ago? Would this trigger a reassessment of our property?
A: First, hearty congratulations on living in one home for so long and celebrating more than 50 years of marriage. In thinking about making a change to title, it’s quite fortuitous that you figured out that the title to your home is in both of your names as tenants in common.
In the most basic of situations, a couple can own a home as joint tenants with rights of survivorship or as tenants in common.
When you own a home in joint tenancy, when any one of the owners dies, that owner’s interest automatically goes to the surviving joint tenant. On the other hand, when people own a home as tenants in common, each owner owns a specific share of that home. In your situation, you and your wife each own a 50% in the home. If either of you die, your 50% interest in the home would be distributed as provided in your will or as provided by law.
When people buy a home and fail to designate how they would like to own the property, in most situations, the law will say that when the deed is silent on how the parties will take title to the property, they must have decided to take it as tenants in common.
Did you originally intend to own the property as joint tenants with rights of survivorship and now want to correct that situation? That’s one set of decisions to make, but since it’s likely that you and your spouse are now well into your 70s (or perhaps older), you might want to spend a few minutes thinking about what will happen to the home in the event you still own it at the time of your deaths.
It would be simple for us to say that you can simply record a new document putting both of you onto title to the home as joint tenants with rights of survivorship. Usually, when you make a simple change in the title from tenants in common to joint tenants, the taxing authorities will ignore that change. You might have a similar result if you end up putting the property into a living trust.
When you put your home in a living trust, the trust becomes the owner of the home and you and your wife would become the beneficial owners of the trust. For practical purposes, there isn’t much difference as to how you would handle the home and most taxing authorities allow homeowners to transfer title to trusts for estate planning purposes without tax or assessment penalties.
You’d still have to pay the cost of getting the documents prepared and the cost of recording or filing documents, but your home’s value shouldn’t change in the eyes of the taxing authorities. For example, in California there is a specific exclusion for transfers to correct the names on title or solely for correcting the way ownership was held or to revocable trusts.
You should check with the office that collects or assesses values in your location for more information, but we expect that they will tell you that you can change it without impacting your current home’s value in their eyes.
Having said that, it might be a good time for you to evaluate your estate and the plan for your assets and where you want your assets (including your home, but other items also) down the line. Do you have a will? Do you have a power of attorney for health care? Have you talked to your family about the disposition of your assets?
These are just a few of the questions you might want to think about before deciding on next steps. For some property owners, there may be federal tax law benefits to having the property split in two on the death of one of the spouses. We can’t get into those issues here, but in larger valued estates it can be a benefit.
Finally, on the title insurance policy, we doubt that after more than 50 years you’ll have any issues, but you should know that the original title insurance policy named you and your wife as the insured. If you change the ownership from tenants in common to joint tenants, you and your wife are still the owners of the home and still named on that policy. In case of a title loss, you or your wife are still on title and can make a claim against that title insurance policy from 50 or so years ago. Thanks for your question.
(Ilyce Glink is the author of “100 Questions Every First-Time Home Buyer Should Ask” (4th Edition). She is also the CEO of Best Money Moves, an app that employers provide to employees to measure and dial down financial stress. Samuel J. Tamkin is a Chicago-based real estate attorney. Contact Ilyce and Sam through her website, ThinkGlink.com.)
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