A Brief Introduction About the Right of Survivorship
Right of Survivorship Agreement is the right through which a particular person inherits certain property upon the death of one of the owners of that property. The definition of this right is “the privilege that a person has to acquire the property of that person upon his or her death”‘. It determines what happens to a particular asset after one of its owners dies.
This right only arises in a property with joint tenancy or one that is jointly owned by two persons. It does not apply to independently owned property. An agreement which lays down that the property will pass to the surviving owner is known as the right of survivorship agreement. There are two situations in which such an agreement may be created. They are as follows:
- The most common one is the “community property with right of survivorship.” This agreement is meant for a married couple and is used as a method of transferring property to a spouse upon the death of the other. The property that is jointly owned by the couple is known as community property.
- The second situation is known as the “joint tenants with right of survivorship.” In this case, two or more unmarried people who have a joint interest in a particular property can enter into this agreement. For example, two brothers who own property can create this agreement to state that, upon the death of one brother, the property will transfer to the surviving brother.
Who Takes the Right of Survivorship Agreement?
As seen above, Right of survivorship agreement can be entered into by a married couple with respect to community property and also by unmarried persons with respect to jointly owned property. The deed that is created by them will depend on the type of property.
Purpose of the Right of Survivorship Agreement – Why Do You Need It?
Right of survivorship agreement is a popular one and is used extensively as a real estate planning tool. The purpose of this agreement is to provide an easy method for transferring of property on the death of a particular person. The surviving person will not have to go through the process of probate in such a case. Hence, it is a fast and seamless process for the transfer of property in the event of the death of one of the parties.
The process of probate can be a long and time consuming one and may also result in certain assets being frozen. This can cause great inconvenience to the surviving owner. Hence, this agreement is a good way of bypassing the probate process altogether.
Also, this agreement holds a lot of importance as it takes precedence over all other claims to the property. This ensures that the property continues to be held by the owners of the property and does not pass on to some other person. The interest in the property shall transfer to the person mentioned in the deed, and this overcomes any bequeaths in a will as well.
However, if there is a case where a piece of community property is held by a married couple, and they wish to transfer the property to their children and not to the surviving spouse, then this agreement will not come into play. In this case, the married couple will have to mention in their wills that their share in such property shall pass on to their children upon their demise and will not transfer to the surviving spouse.
Contents of the Right of Survivorship Agreement
It is very important to include all the essential clauses in the right of survivorship deed as otherwise, the deed may not be considered as a legally binding one. The parties must select the correct deed according to their situation. As mentioned above, it may be a deed for community property or for the joint property.
The deed must give detailed information about both parties. This includes their names, addresses, name of their agents, if any, etc. A consideration amount also must be mentioned. In most cases, as the transfer of property amounts to a gift, this consideration is a small amount, such as one dollar.
The most important clause in the deed is a paragraph that should read as follows: “We, __ and _, hereby bequeath all property herein listed to the surviving (either spouse or person) with this right of survivorship agreement. All property will become the property of the survivor so long as they survive the decedent by one day.”
All the property that the parties wish to include within the ambit of the agreement must be listed out in the deed itself. A description of the properties must be given by including information about its location and other important details.
How to Draft the Right of Survivorship Agreement?
The following are the steps to follow while drafting the agreement:
- The first and foremost step is for the parties to determine that they are residing in a state where such survivorship rights are recognized. Otherwise, such an agreement will not be recognized.
- The parties should then make a list of what items will come under this agreement. This shall include land, bank accounts, mutual funds, vehicles, and similar investments. It is necessary that these items are jointly held by the parties. Any independently held property cannot be brought within the purview of this deed.
- The parties must then obtain two separate deeds. One is the joint ownership deed, and the other is the rights of survivorship deed. The first deed will show that both parties own a share in the property, and the second one will state that the property will be transferred to the surviving party upon the demise of one of them.
- These deeds should be filled out carefully and signed by both parties in the presence of a notary.
- The deeds must then be signed by witnesses and by the notary.
- It must, thereafter, be filed with the local county recording office. If the deed is not so filed, it shall not be considered to be binding.
- The major negotiations under this agreement will revolve around which assets are to be included within the purview of this deed and which are not.
- However, this should not pose to be much of a problem as parties prefer to include all the assets that are jointly held by them.
Benefits and Drawbacks of the Right of Survivorship Agreement
The following are the benefits and drawbacks agreement:
- The biggest benefit of this agreement is that the property passes to the survivor immediately on the death of the other person. It is a very easy method and negates the requirement of probate. A probate process can take months or sometimes even years to be completed.
- It ensures that the surviving owner gets a clear title to the property.
- This deed ensures that the property remains with the rightful owner of the property.
- A drawback of this is that not all states recognize this kind of an agreement.
- A limitation of this agreement is that it does not provide any protection from creditors. If there is any liability attached to the property, such liability will also transfer to the survivor along with the ownership interest.
What Happens in Case of Violation?
Any property that is included within the ambit of this agreement is essentially jointly held by the concerned parties. Joint owners or joint tenants do not have the right to sell off property that is listed out in the deed unless there is only one owner left(1). If such a sale is made, it will amount to a violation of the agreement. In such a case, the other party has the right to sue the breaching party for a breach of contract.
For example, if A and B enter into this kind of a survivorship deed, A cannot bequeath his share to any third party as that will amount to a breach of contract. If A mentions in his will that such share will transfer to C on A’s death, this will not be recognized as A’s share immediately transfers to B on A’s death. Hence A will have no share to bequeath on his death.
Also, if A transfers his interest to C while A is alive, B can sue A for a breach of contract as this goes against the terms of the survivorship deed.
A joint tenancy can be severed by a written agreement created between the parties or by the filing of a lawsuit for the partition of the property.
In conclusion, the agreement is a very useful method to ensure that property is transferred seamlessly to the surviving owner of a particular property. It is the easiest and fastest way of making sure that the property remains with the rightful owner, and a time-consuming probate process can be avoided. This agreement has been recommended by lawyers as an effective tool for planning a successor to property.