Understand Your Vehicle of Ownership: Part 3

Welcome back for part 3 of the series titled Understand Your Vehicle of Ownership. Yes, I’m still in Villahermosa, Mexico, and yes, I am still with Pequeno Hombre, my favorite beer drinking horse.

As a reminder, when two or more people take title to land, this is referred to as a “concurrent estate.” You, as purchaser, will soon be acquiring title to land. If you are acquiring title with additional people, you should be aware of some basic facts regarding the tenancies that are available to you. The estate vehicle you choose is extremely important. What follows is a presentment and explanation of the basics of the concurrent estates. An understanding of these estates will allow you to choose the proper tenancy for your situation.

Reputation First Title Agency is not a law firm, and this article is not to be construed as offering legal advice. The purpose of this article is simply to offer necessary information. This information can be used in discussing your options with your attorney. Once you and your attorney have decided on a tenancy that is proper for your situation, the deed to your land can be drafted properly and, most importantly, the deed will satisfy your intentions.

The four basic concurrent estates are 1) the tenancy in common; 2) the joint tenancy; 3) the joint tenancy with full rights of survivorship; and 4) the tenancy by the entirety. My writing today will cover the third of these, the joint tenancy with full rights of survivorship. The tenancy by the entirety will be covered in part 4 to follow.

#3: The Joint Tenancy With Full Rights of Survivorship

Let me start by posing a question: how many homeowners in Michigan do you think would intentionally hold title with their co-owner as follows: joint life estate with alternative contingent remainders? I dare say the answer is probably one in one thousand. Furthermore, how many non property professionals do you think would understand the language and meaning of this estate?

The joint tenancy with full rights of survivorship is an ultra joint tenancy, as the last survivor cannot be denied sole ownership of the property.

The following example demonstrates how a joint tenancy with full rights of survivorship is created by deed:

Example: Dave Phillips, a single man, conveys blackacre to A and B, as joint tenants with full rights of survivorship.

Discussion

Notice the additional language “with full rights of survivorship.” This phrase distinguishes the joint tenancy with full rights of survivorship from that of the traditional joint tenancy. Remember, in a traditional joint tenancy, discussed in the previous section, the state of title would read A and B, as joint tenants.

Conveyance by co-tenant.

What happens if A conveys to C?

In a traditional joint tenancy, B and C would hold as tenants in common. Remember, a joint tenancy can be easily severed. But what about the joint tenancy with full rights of survivorship?

Unique problems arise when one of the owners in a joint tenancy “with full rights of survivorship” attempts to convey its interest to a third party. The phrase “with full rights of survivorship” creates an absolute right of survivorship in each owner.

(Example):

Original Grantees in Deed: A and B, as joint tenants with full rights of survivorship.

Actual State of Title: Joint life estate held by A and B, with alternative contingent remainders held by A and B.

Analysis of the Actual State of Title.

Let me start with a discussion of the alternative contingent remainders: the remainder interests of A and B are contingent on one tenant surviving the other. If A were to die, B’s contingent remainder would vest, resulting in a vested remainder held by B. B would then own both a life estate interest and a vested remainder. The life estate and the vested remainder would merge. As a result, B would hold in fee simple absolute. Simple!

We have a joint life estate held by A and B. This is significant when either A or B attempts to convey to a third party. Here’s how it works.

State of Title: Joint life estate held by A and B, with alternative contingent remainders held by A and B.

Subsequent Conveyance: A conveys to C.

Resulting State of Title: Life estate per autre vie held by C, life estate held by B, with alternative contingent remainders held by B and C.

Remember, a life estate per autre vie means a life estate measured by the life of another. It is true that A has effectively conveyed his life estate to C, however, C’s life estate period is measured by the life of A. The determining factor in our current state of title hinges on the alternative contingent remainders. This is what is unique: the relation between A and B still exists after the conveyance from A to C. For C to obtain sole ownership, B must predecease A. If A dies before B, C’s interest is terminated. This is because C’s remainder interest is contingent upon A surviving B. Imagine C’s surprise when he finds out that his interest is forever terminated upon A’s death? This displays the sneaky power of the right of survivorship element.

I apologize for this complicated section, but it is necessary in understanding just how tricky the joint tenancy with full rights of survivorship really is. Compare this to the joint tenancy covered in the last section. With the joint tenancy, a severance can be made without the creation of  a life estate per autre vie. Make sure you consider this with your attorney.

Death of co-tenant.

In the above state of title, if A dies, B would own blackacre. This result is reached in both the joint tenancy and the joint tenancy with full rights of survivorship.

Joint tenancy with full rights of survivorship is not subject to dower.

As with the joint tenancy, dower does not attach to property held in joint tenancy with full rights of survivorship.

Please click on my link below to view my blog on all things title.

http://davidphillipsmichigan.blogspot.com/

Please revisit this site soon for part 4, the final article in this series.

Dave Phillips~Title Examiner

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