When you are looking around for information about estate planning, you may hear about joint tenancy. There are always those who are looking for easy answers, and joint tenancy can seem like a simple solution on the surface.
Joint tenancy is a somewhat fancy way of describing co-ownership. If you add someone to the title or deed of property that you own, this person would become a joint tenant.
When you pass away in direct personal possession of property and you arrange for its distribution through the terms of a last will, the property becomes probate property at first. It will not be distributed to the heirs to the estate until after the process of probate has run its course.
This process can be time-consuming, and considerable expenses can pile up during probate. As a result, many people look for ways to avoid it.
Joint tenancy typically comes with right of survivorship. If you add a joint tenant to property that you own, the joint tenant would assume ownership of the the entirety of the property after you pass away. The transfer of ownership would take place outside of the process of probate.
Drawbacks of Joint Tenancy
Though this may sound great, there are some drawbacks that you may want to take into consideration. The major drawback is the fact that you are surrendering ownership of half of the property when you add a joint tenant.
You have no way of knowing if the joint tenant will run into financial and/or legal difficulties at some point in time. Even responsible people are sometimes targeted by litigants seeking redress. If the joint tenant was to become the target of a lawsuit, his or her portion of the property that is held in joint tenancy could be attached.
There is also the matter of divorce proceedings. The joint tenant owns half of the property, plain and simple. His or her portion of the property would be in play if a divorce was to take place.
Tax liens could also be placed on the property, and creditors could come forward with the property in their cross hairs.
If you wanted to sell the property, you could not do so without the approval of the joint tenant, and this is another drawback.
You may tell the joint tenant to sell the property after you die and distribute the assets among multiple heirs. There is nothing legally compelling the joint tenant to follow your instructions.
Before you decide that joint tenancy is right for you, you may want to discuss things in detail with a licensed estate planning attorney. If you want to take action, contact us through this website to request a free consultation.
Mr. Kraft assists clients primarily in the areas of estate planning and administration, Medicaid planning, federal and state taxation, real estate and corporate law, bringing the added perspective of an accounting background to his work.