What Happens To A Property Held In Joint Tenancy When One Spouse Dies During A Divorce Proceeding?
Short Answer: If you die during the divorce proceeding, your spouse will receive your one-half of the house unless you sever your interest in the joint tenancy.
Generally, if one party dies after a Petition for Dissolution of Marriage has been filed, but before an entry of Judgment, the marital dissolution action is terminated, meaning the parties remain married. For additional information about the specific impacts of the death of a spouse during a divorce action, please see our post here.
Specifically referring to property held in joint tenancy, the surviving party takes ownership in entirety of the property. This means that no interest in the deceased spouse’s property gets passed to their heirs.
What Are The Various Types of Ownership Interests?
Joint Tenancy vs. Tenancy In Common.
Joint Tenancy (or also seen as a Joint Tenancy with Right of Survivorship) must meet four requirements, also known by the acronym TTIP.
Time: Each person must receive or obtain title to the property at the same time.
Title: The deed needs to reflect the name of each person on the same document.
Interest: Each person owns an equal portion of ownership.
Possession: Each person possesses the same right to occupy the property.
Each spouse has an equal ownership interest in the house and upon the death of the other spouse, the property passes in entirety automatically to the surviving spouse.
Joint tenancy can only be established if the owners acquire the property at the same time, have the same title on the property, have an equal share in the property, and must have the same right to possess the property (TTIP). A joint tenancy is most commonly used between married couples, or between a parent and their child. But it can also be established between parties who are not related. Other assets, like bank accounts, can also be held in joint tenancy.
A Tenancy In Common (TIC) is a type of shared ownership in a property and typically does not have a right of survivorship. This means that when one owner dies, his or her interest will pass to their selected beneficiary. In a TIC, the percentage of ownership for each person can be unequal. For example, person A owns 1/3 of the house and person B owns 2/3 of the house. However, person A and B have the same right to occupy and use the entire house. Each owner has the right to sell or pass on his or her portion of the ownership without the other owner having a right to interfere like a joint tenancy.
Problems that arise from Joint Tenancy or TIC When a Spouse Dies During a Divorce.
The biggest problem we see when a party dies before the divorce is final is that the property is awarded in entirety to the surviving spouse, which may or may not mean that the children’s rights and interests are protected. If it is particularly important to preserve your children’s interest in the property, or you fear that your spouse will not maintain the property for the benefit of the children, this could be a significant issue.
Another possible issue: regardless of the individual amounts that each owner has given or paid for the assets, each owner must have an equal share of the total assets, given as 1/n percent, where n is the total number of owners. This means upon death, any separate property interest that the deceased spouse may have had in the property are effectively transferred to the surviving spouse. No court can later determine the deceased spouse’s separate property interests in a property to reimburse the decedent’s heirs.
For example, spouse A and spouse B own a house as JTROS. Spouse B dies. Spouse A automatically owns 100% of the house without having to ask a probate court to award the property to them. This applies to any JTROS during the divorce or legal separation proceeding, unless the property has been awarded to one party through an order of the court, which often does not happen until the end of the divorce action.
Note, a will or trust is ineffective in transferring your interest in a JTROS to another beneficiary unless you sever the JTROS. By severing your JTROS, your interest with your spouse will turn into Tenants in Common (TIC). As TIC, you are free to do as you please with your interest in the house.
How do I Severe My Interest in the JTROS?
Pursuant to Civil Code §683.2(a), “a joint tenant may sever a joint tenancy in real property as to the joint tenant’s interest without the consent of the other joint tenants by any of the following means:
- Execution and delivery of a deed that conveys legal title to the joint tenant’s interest to a third person, whether or not pursuant to an agreement that requires the third person to reconvey legal title to the joint tenant.
- Execution of a written instrument that evidences the intent to sever the joint tenancy, including a deed that names the joint tenant as transferee, or of a written declaration that, as to the interest of the joint tenant, the joint tenancy is severed.”
When is the severance effective?
Pursuant to Civil Code §683.2(c), the severance is not effective until you record the severance with the county where the property is located and before the death of the severing joint tenant. You may also effectuate a severance by executing it and having it acknowledged before a notary public at least three days before the severing joint tenant’s death and the severance is recorded in the county where the property is located no later than seven days after the death of the severing joint tenant.
Can I severe the JTROS during the divorce proceeding?
Yes, but you must file a Notice of Severance of Right of Survivorship and serve the other party because the Automatic Temporary Restraining Orders (FL-110) prevents both parties from transferring, encumbering, hypothecating, concealing, or in any way disposing of any property, real or personal without other party’s written consent.
You also have the option of entering a Stipulation and Order, an agreement, with the other party to change the JTROS to TIC.
Are there tax consequences for severing a JTROS?
Yes, severing a joint tenancy may result in a reassessment of the property, which could lead to higher taxes. Please consult with a tax expert prior to severing a joint tenancy.