Definition
The term “With Benefit of Survivorship” in finance refers to a form of property ownership where, upon the death of one owner, the property automatically passes on to the surviving owner or owners. It’s commonly used in joint tenancies and some types of retirement accounts and investment funds. This arrangement eliminates the need for the property to go through probate.
Phonetic
/wɪð ˈbɛnɪfɪt ɒv sərˈvaɪvərʃɪp/
Key Takeaways
- Benefits to Surviving Joint Owners: With Benefit of Survivorship refers to a stipulation in several types of joint ownership where upon the death of one owner, the property rights automatically get transferred to the surviving owners. This eliminates the need for the property to go through probate.
- Applies to Various Types of Property: This approach can apply to various types of property- including real estate, bank accounts, and other assets. The way it is set up depends on the rules of the state where the property is physically located or the account was opened.
- Potential Tax Implications: When property is passed on with benefit of survivorship, there may be tax implications for the surviving owners, such as inheritance tax or capital gains tax, depending on the laws of the relevant jurisdiction.
Importance
The business/finance term “With Benefit of Survivorship” is important because it refers to a legal agreement that allows property to pass directly to the surviving owners upon the death of one owner, bypassing the lengthy and often expensive process of probate. This forms an essential part of joint tenancy arrangements, often between spouses or business partners, where assets including real estate, vehicles, and financial accounts are jointly owned. ‘With Benefit of Survivorship’ ensures a swift and predetermined method of transferring ownership, safeguarding the assets from becoming entangled in potential post-death legal disputes or debts. Therefore, understanding and utilizing this term effectively can bridge the gap between estate planning and asset protection, ensuring a smoother transfer of assets during challenging times.
Explanation
“With Benefit of Survivorship” serves as a crucial provision in joint ownership, particularly in fields such as real estate and finance. Its main purpose is to ascertain a seamless transfer of ownership rights to the surviving owners upon the death of one of the owners. This provision is predominantly used to bypass the probate process, thus allowing the surviving owners to gain immediate control and access to the property or assets. It contributes to mitigating potential disputes about the decedent’s estate, and offers a level of predictability, stability, and speed in the transition of ownership.The use of “With Benefit of Survivorship” is commonly seen in several forms of joint ownership, such as Joint Tenancy and Tenancy by the Entirety. In the instance of a Joint Tenancy, for example, when one tenant passes away, their share in the property automatically gets passed on to the surviving tenants. This process continues until the last survivor eventually owns 100% of the assets. In terms of its practical financial implications, it can considerably affect estate planning, especially in terms of minimizing tax liabilities and easing the administrative process following the death of an owner.
Examples
1. Joint Tenancy With Right of Survivorship (JTWROS): Often used in real estate, but also for other types of assets, joint tenancy allows multiple people to own a property together. If one of the owners passes away, the remaining owner(s) automatically acquire the deceased owner’s share, irrespective of what’s mentioned in the will. This concept is a direct application of the benefit of survivorship.2. Retirement Funds – Pension and Social Security Benefits: In many cases, after the demise of the retiree, the spouse or the nominated person gets the right to receive funds through benefit of survivorship. Also known as a “survivor’s benefit,” the survivor can receive a percentage of the retiree’s pension or social security benefits.3. Bank account with Right of Survivorship: Joint bank accounts often have the provision of “right of survivorship.” In this scenario, if one account holder dies, the surviving account holder automatically becomes the sole owner of the assets in the account. It bypasses the probate process thereby ensuring immediate access to the deceased’s funds.
Frequently Asked Questions(FAQ)
What does the term With Benefit of Survivorship mean in finance?
The term With Benefit of Survivorship refers to a type of joint ownership arrangement where, upon the death of one of the owners, the surviving owner(s) get the deceased’s share of the property or assets.
How does the process of With Benefit of Survivorship work?
In a With Benefit of Survivorship arrangement, if one owner dies, their share or ownership does not get passed on to their legal heirs or estate. Instead, it gets passed on to the surviving co-owner(s). It’s important to note that all co-owners must agree to the arrangement.
How is With Benefit of Survivorship different from other forms of joint ownership?
The primary difference is what happens when one co-owner dies. In other forms of joint ownership like tenants in common, a deceased owner’s share of an asset is passed on to their heirs or estate, not the surviving owner(s). With Benefit of Survivorship ensures that the surviving owner(s) automatically take over the deceased owner’s share.
Can With Benefit of Survivorship be applied to all forms of assets?
It largely depends on the jurisdiction. Generally, it applies to certain types of tangible assets like real estate and certain financial accounts, but it may not apply to all assets. Legal advice should be sought to understand the applicability better.
Are there any disadvantages to a With Benefit of Survivorship arrangement?
A potential disadvantage can be a lack of flexibility. Once the arrangement is in place, the co-owners can’t change it without the consent of others. If one of the co-owners wants to leave their share to their heirs, it may not be possible in such an agreement.
Can a With Benefit of Survivorship agreement be changed?
Yes, but commonly, all parties in the agreement should consent to the change. It’s vital to understand the state laws where the agreement is in place as they can vary.
How does a With Benefit of Survivorship affect taxations?
The tax implications can vary, and it’s recommended to seek advice from a tax specialist. In some cases, the surviving owner may be liable to pay taxes for the deceased’s share, depending on their jurisdiction’s inheritance tax laws.
Related Finance Terms
- Joint Tenancy
- Property Ownership
- Will & Estate Planning
- Right of Survivorship
- Inheritance Law
Sources for More Information
