“Please” and “thank you” may be the “magic words” your mother taught you, but there are also magic words that can play a significant role in the rights of Michigan real estate owners. If you own or are about to purchase a home, cottage, or other property in the state with someone other than your spouse, understanding the difference between owning that property as “joint tenants” and “joint tenants with full right of survivorship” is critical.
That’s because adding the magic words “with full rights of survivorship” in the deed means that the joint tenants are stuck with each other in perpetuity unless they all agree to end the joint tenancy and permit the conveyance or partition of the property.
When two or more people own Michigan real property as joint tenants, each person owns an undivided equal interest in the property, is entitled to the right of possession, and cannot be excluded by another owner. This type of ownership is usually reflected in the conveyance as transferring the property “To Party A and Party B as joint tenants” or “as joint tenants and not as tenants in common.” Without such language, Michigan law presumes that two or more unmarried owners hold title as “tenants in common.” Under a tenancy in common, when one owner passes away, their interest is conveyed to the owner’s heirs either under Michigan’s law of intestacy or according to the owner’s will. The other owners have no right of survivorship that would result in them acquiring a proportionate share of the deceased owner’s interest in the property.
But in a joint tenancy, there is a right of survivorship, which means that an owner’s interest is conveyed upon their death to the other owners, regardless of what the decedent put in his will, trust, or another document. This allows the property to be transferred outside of probate upon the death of a co-owner, which can offer significant estate planning advantages.
Besides a right of survivorship, the other main characteristic of joint tenancy is the right to partition the property. That is, an owner who wants to cash out their interest in the property can file a partition action to have a court either divide the property between the owners or sell the property and divide the sale proceeds between the owners. In cases involving property with a single residence, a partition action almost always involves the latter remedy. Of course, if the other owners agree to purchase the departing owner’s share or sell the property, a partition lawsuit, which can be contentious, costly, and time-consuming, won’t be necessary.
Additionally, each owner in a joint tenancy retains the right to convey their interest to a third party without needing the consent of the other owners. When a joint tenant conveys their interest to a third party, it severs that interest from the other joint tenants and creates a tenancy in common between the third party and the remaining joint tenants. This can also happen involuntarily if a creditor of the joint tenant levies and sells the joint owner’s interest.
Joint Tenants With Full Rights of Survivorship
Here’s where the magic words come into play. A conveyance to two or more people as “joint tenants with full rights of survivorship” shares many of the same characteristics as a joint tenancy without such language – with one significant exception.
As with a joint tenancy, all owners share equal ownership shares and rights in the property, and the death of a joint tenant with full right of survivorship conveys the deceased owner’s interest to the other co-owners regardless of the decedent’s estate planning documents. It also keeps the property out of probate.
However, a joint tenant with full rights of survivorship cannot sever the joint tenant relationship as in a joint tenancy unless all the other owners consent. This means that owners do not enjoy a full right of partition as they would in joint tenancy because the survivorship right is not severable without the consent of the other joint tenant. It also means that if the relationship between owners goes south, a party that wants to cash out their interest in the property won’t be able to do so without everyone’s agreement and will be stuck in the relationship until and unless all of the other owners pass away before they do.
If you are considering purchasing or investing in Michigan real estate with other people, you should fully understand and consider the implications of these two types of ownership.