Joint Ownership with Rights of Survivorship

Topics Covered

JTWROS to Avoid Probate
Survivorship Practice Prior to the Estates Code
Methods of Creating JTWROS
Survivorship for Spouses and Non-Spouses
Drafting the Deed at Closing
Adding a Joint Owner to Title
Other Deeds Designed to Avoid Probate

Joint Ownership with Rights of Survivorship

Joint ownership of real property with rights of survivorship (JTWROS) combines two distinct concepts: (1) co-ownership of an undivided fee simple interest in and to the entire propertyplus (2) automatic succession to sole ownership upon death of the other co-owner. Applicable law is found in Estates Code Chapter 112 (which governs spousal community property) and Chapter 111 (which applies to non-spouses).

When the right of survivorship exists as a result of a signed written agreement, sole ownership vests in the surviving co-owner automatically without need for notice, probate, or other action by anyone. “A community property survivorship agreement that satisfies the requirements of [Estates Code Chapter 112] is effective and enforceable without an adjudication.” Est. Code Sec. 112.053.No probate or other legal action is required at the time of a co-owner’s death.

Although commonly used by married couples for their homestead, JTWROS is also available to unmarried persons for any type of real property that is held in personal names.

A signed written agreement pursuant to the Estates Code is the exclusive means of establishing rights of survivorship in real property, whether the property is characterized as community or separate, and whether the parties are married or not.

While JTWROS is quite useful as to any given property or account, it is not intended to replace the broader scope of a last will and testament. “The legislature did not intend for [the JTWROS statute] to validate agreements allowing testamentary disposition of a person’s entire estate, including real property, without the requirements of a will or the formalities of will execution.” Hibbler v. Knight, 735 S.W.2d 924 (Tex.App.—Houston [1st Dist.] 1987, write ref’d n.r.e.).

Common Law History of JTWROS

The Estates Code substantially replaces and supersedes existing common law rules, including the requirement that JTWROS be established at the inception of title (when the property is first acquired). At common law, the traditional means for achieving ownership accompanied by rights of survivorship was through a deed stating that title was being conferred as “joint tenants with rights of survivorship and not as tenants in common.” Note that the tenancy language in this context derives from historical common law verbiage. Here, tenant actually means the co-owner of a fee-simple interest, not a lessee.

At common law and before the Estates Code, a deed conferring JTWROS was also required to adhere to the four unities of time, title, interest, and possession. In other words, all joint owners were required to receive their interest in the property at the same time; through the same legal document; with each having an equal and undivided ownership share; and with each having an equal right to possess and use the entire property. While these traditional criteria have been largely superseded by the Estates Code, they remain relevant in cases where there is ambiguity and judicial interpretation is required.

“Texas recognizes two types of co-tenancies which may be deeded: a tenancy in common and a joint tenancy [with rights of survivorship or JTWROS] . . . . Under a tenancy in common, the deeded interest descends to the heirs and beneficiaries of the deceased cotenant and not to the surviving tenants. . . . A joint tenancy, on the other hand, carries a right of survivorship . . . upon the death of one joint tenant, that tenant’s share in the property does not pass through will or the rules of intestate succession; rather, the remaining tenant or tenants automatically inherit it.” Wagenschein v. Ehlinger, 581 S.W.3d 851 (Tex.App.—Corpus Christi 2019, pet. denied).

Generally speaking, Texas co-owners are presumed to be tenants in common. Est. Code Sec. 101.002. This means that in most cases the decedent’s interest passes vertically downward to the heirs rather than horizontally to the surviving co-owner—although the rules of intestate succession (no last will and testament) can get complicated when it comes to spouses. It is first necessary to determine if the deceased spouse died testate (with a will) or intestate (without a will). If a spouse dies intestate, property automatically vests 100% in the surviving spouse only if the property is community property and the deceased had no children—or, if there are children, all of them are the result of the marriage between these two spouses (i.e., there are no children from a prior marriage). Est. Code Sec. 201.003. Accordingly, it may be a useful part of one’s estate plan to enter into a JTWROS agreement.

In the absence of a signed written agreement as required by the Estates Code, spousal rights of survivorship (i.e., inheritance of full title) is not automatic in Texas. It depends on the circumstances and the rules of intestacy law.

Two Methods for Creating JTWROS

Co-ownership of property and rights of survivorship are separate and severable legal concepts. With this principle firmly in mind, there are two practical methods of creating JTWROS:

1) a stand-alone survivorship agreement can be executed pursuant to Estates Code Section 112.051 for married persons or Section 111.001 for unmarried persons, an instrument that has nothing to do with conveying title; or

2) a survivorship agreement can be incorporated into the deed itself, by which the property is transferred into the two names. Such a combined instrument must fulfill the requirements of a deed (transfer of title) plus meet the Estates Code requirement of a signed written survivorship agreement between the new joint owners. This requires creative draftsmanship but is easily done. The deed then becomes a contract as well as a conveyance.

In preparing a combined instrument, the Estates Code requirement of a written agreement must be followed so any deed purporting to create JTWROS must (1) contain an express survivorship agreement within its four corners and (2) bear the notarized signatures of both grantor and grantee.

This all-in-one approach is the preference of most buyers who tend to want a traditional JTWROS warranty deed that plainly states survivorship provisions on its face.

Clear Drafting Required

Clarity and express intent are important drafting requirements in creating JTWROS. Between married persons, a “survivorship agreement may not be inferred from the mere fact that the account [or deed title] is designated JT TEN, Joint Tenancy, joint, or other similar abbreviation.” Est. Code Sec. 112.052(d). Between unmarried persons, a survivorship agreement “may not be inferred from the mere fact that property is held in joint ownership.” Est. Code Sec. 111.001(b). An agreement as to survivorship between unmarried persons must be clearly spelled out by use of the words:

with rights of survivorship
will become the property of the survivor
will vest in and belong to the surviving spouse; or
shall pass to the surviving spouse.

Spouses and Non-Spouses

As to married persons, spouses may at “any time agree between themselves that all or a part of their community property, then existing or to be acquired, becomes the property of the surviving spouse on the death of a spouse . . . by means of a written agreement signed by both spouses. . . .” Est. Code Sec. 112.051 and 112.052.

As to unmarried persons, the statute states that “two or more persons who hold an interest in property jointly may agree in writing that the interest of a joint owner who dies survives to the surviving joint or owner or owners.” Est. Code Sec. 111.001(a).

JTWROS may be revoked. A community property survivorship agreement may be revoked under Estates Code Section 112.054 by signed written agreement; by written notice of one spouse that is delivered to the other; or by sale or other disposition of the underlying property.

Adding another Person as a Joint Surviving Owner

Before the Estates Code (when common law still required observance of the four unities), JTWROS could be created only at the inception of title, when both parties received their property interest. “Adding” someone to such a deed in order to create JTWROS meant transferring the property “out” to a trusted third party who then transfer the property back “in” to the names of the two joint owners with rights of survivorship.

This cumbersome process is no longer required. Nowdays, the easiest method in such cases is to transfer title from the one existing owner into both names with rights of survivorship, utilizing either a stand-alone survivorship agreement or a new deed transferring title into both names that also meets the signed written agreement requirement of the Estates Code.

Selling a Joint Ownership Interest

An existing JTWROS agreement does not prevent a co-owner from conveying his or her undivided ownership interest in the property (Fogal v. Fogal, No. 09-21-00264-CV, 2023 WL 3235820 (Tex. App.—Beaumont May 4, 2023, no pet. h.)). Doing so, however, terminates the survivorship agreement between the co-owners since that agreement is personal to those two parties and no others. Thus ownership persists but the right of survivorship evaporates.

JTWROS is not available in cases of percentage interests.

JTWROS AND THE CLOSING DOCUMENTS

JTWROS Language in the Deed

If JTWROS is desired to be expressly shown in the deed to the buyers at closing, then strategic planning should occur before the earnest money contract is signed. Since neither the TREC nor TAR contracts offer a box to check for the purpose of accomplishing JTWROS in the deed, a custom special provision must be added to the contract.

A good solution is to attach a special provisions addendum to the contract (prepared by the buyer’s attorney) that fully addresses the JTWROS issue and outlines how it will be handled at closing. Optimally, the buyer’s attorney will draft the warranty deed so as to ensure that it complies with Estates Code requirements. This is a slight variance from Texas custom since the seller usually prepares the deed; but arrangements can easily be made for the seller to review and approve a JTWROS deed prior to closing. Allowing for review and approval usually overcomes any seller resistance.

Again, JTWROS should be planned for at the contract stage and not left until closing. TREC and TXR contracts do not have much to say about the content of closing documents; accordingly, all main points pertaining to how these documents will be drafted should be (1) negotiated and settled before the contract is signed and then (2) reflected in a contract special provision.

The buyer’s attorney should be proactive in this process. It is generally a mistake to rely on title company attorneys to produce custom provisions or agreements for any of the closing documents. Unless such instructions are given, title attorneys will produce only minimalist instruments that include no custom special provisions. As a rule, if any custom special provisions are anticipated in any closing documents, then these should be expressly provided for in the contract or in a signed addendum or contract amendment.

One should recall that title company attorneys exist to represent the interests of the title company, not the buyer or seller. It is not their purpose to serve as everyone’s general legal advisor and custom document drafter. This is a persistent problem in residential transactions where buyer, seller, and even the brokers often view the title attorney as being available to advise and “represent everyone.” This is definitely not the case.

When it comes to implementing JTWROS, the buyer and seller should each consult their own attorneys as they are advised to do in paragraph 23 of the TREC 1-4 Contract.

General Versus Special Warranty Deed

A general warranty deed is preferred by buyers because it warrants title going all the way back to the sovereign. Because of this warranty, the grantor is bound to defend against title defects even if those defects were created prior to the grantor’s period of ownership. By contrast, in a special warranty deed, title is warranted only coming out of the grantor and no further back in the chain than that. The grantor’s liability for title defects is thus limited to his period of ownership.

In achieving JTWROS, either a general or special warranty deed may be used. Even a deed without warranties can work. Why? Because it is not the grantor’s title warranties (arising from the past) that are at issue, but how title will be taken by the grantees going forward.

RELATED DEED TYPES USED FOR ESTATE PLANNING

There are other deed types that can be used to achieve results similar to a JTWROS deed. It is worthwhile to briefly summarize these:

1. Transfer on Death Deed. A transfer on death deed (TODD) is an uncomplicated, non-probate method of transferring title to real estate when the owner dies. The Texas Real Property Transfer on Death Act (found in Estates Code Chapter 114. Section 114.051) states that “An individual may transfer the individual’s interest in real property to one or more beneficiaries effective at the transferor’s death by a transfer on death deed. . . .”

A TODD must be recorded. It is effective without consideration and without notice or delivery to or acceptance by the designated beneficiary during the life of the grantor. Est. Code Sec. 114.056. However, vesting is not immediate. A TODD transfer does not actually vest title in the grantee until the grantor’s death.

Certain limitations go along with the TODD format. A TODD cannot be revoked by a last will and testament but can be revoked by a formal revocation that is recorded in the real property records. Est. Code Sec.114.052. In fact, a TODD is revocable even if the instrument states otherwise.

Also, if the grantor sells the property by means of a recorded transfer subsequent to executing a TODD, then the TODD is automatically revoked: “If a transferor during the transferor’s lifetime conveys to any person all of the transferor’s interest in real property that is the subject of a transfer on death deed, the transfer on death deed is void as to that interest in real property.” Est. Code Sec. 114.102. Lastly, a TODD may not be executed by means of a power of attorney. It must be executed by the named grantor.

All in all, a TODD is a good basic estate planning method, particularly if the grantee does not require warranties of title (which are not permitted under Estates Code Section 114.103(d)).

2. Lady Bird Deeds. Lady Bird Deeds, an older method of probate planning, are revocable deeds retaining a life estate in the grantor. Since TODDs are authorized by a relatively recent statute, the use of Lady Bird Deeds has declined but are still a valid means of conveyance.

Lady Bird Deeds are sometimes called enhanced life estate deeds since the life estate retained by the grantor is entirely revocable. In other words, a Lady Bird Deed immediately vests a remainder interest in the grantee that is subject to divestment, meaning that the grantor has the option to revoke the whole conveyance at will. Any other, subsequent conveyance of the property by the grantor will also have the effect of revoking a Lady Bird Deed.

Lady Bird Deeds are based not on statute but on common law. The Texas Supreme Court states that a Lady Bird deed is “a deed that allows a property owner to transfer ownership of the property to another while retaining the right to hold and occupy the property and use it as if the transferor were still the sole owner.” Tex. HHS Comm’n v. Est. of Burt, No. 22-0437, 67 Tex. Sup. Ct. J. 622, 2024 Tex. Lexis 316 (May 3, 2024).

Lady Bird Deeds have been traditionally used to both (1) avoid probate and (2)prevent recovery against a deceased grantor’s probate estate by the Texas Medicaid Recovery Program. When a Lady Bird Deed is used, Medicaid does not require that the deceased’s home be sold in order to pay reimbursement to the Program. Note, however, that a TODD accomplishes this same objective since Property Code Section 114.106(b) expressly provides that real property transferred by means of a TODD is not considered to be a part of a deceased grantor’s estate.

A Lady Bird Deed may be activated on behalf of the heirs by recording a simple affidavit of death stating that the grantor has died. No affidavit of heirship or curative instrument is necessary.

3. Deed into a Living Trust. The advantages of living trusts are significant, which accounts for their multi-state popularity. In establishing a living trust that includes the homestead, it is an essential part of the process to record a deed of the home into the living trust (or, more properly stated, into the trustees acting on the trust’s behalf). The trust agreement is not recorded.

Since record title is held by the living trust (acting by and through its trustees), and the trust does not die, the surviving beneficiaries automatically “inherit” the trust property upon death of the trustor (or for married persons in the typical case) upon death of the last spouse-trustor. There is no need for probate or other legal action, although the beneficiaries would be wise to engage an attorney to overhaul and update the trust agreement for future use.

In order to preserve the homestead tax exemption, both the trust agreement and the deed into trust must be carefully drafted so as to meet the “qualifying trust” requirements of Property Code Section 41.0021 and Tax Code Section 11.13(j).

4. Deed in the Drawer. Executing and delivering a deed without immediately recording it can be an inexpensive estate planning device—sometimes called the deed in the drawer, a variation of a gift deed. If, for example, a parent wants to ensure that property is transferred to a child without probate or other difficulty, then the parent can sign and deliver a deed with the intention that it be held (executed but not unrecorded) until death. This is an entirely legal method that has been used for ages but has the weakness that such deeds are often lost in time.

Conclusion

JTWROS is an effective means of simple estate planning and probate avoidance, particularly for the homestead. When considering using this approach, a buyer should add a special provision at the contract stage to insure that the seller and the title company will agree to the appropriate documentation at closing.