They say that all that glitters is not gold, and this can enter the picture when it comes to so-called “simple solutions.” Something can sound like a good idea on the surface, but when you dig deeper, you can see that the disadvantages could outweigh the advantages. With this in mind, we will look at the drawbacks of joint tenancy in this blog post.
The best way of explaining joint tenancy would be to provide an example. That say that you have one son, and you want your son to inherit your home. You could add your son to the title or deed. Your son would then be a co-owner of the property, and this condition is called joint tenancy. In legal parlance, your son would be a joint tenant.
There are some surface advantages that would be gained under these circumstances. After you pass away, your son would inherit the entirety of the property. This transfer would not be subject to the legal process of probate, so it would take place in a timely manner.
If you never added your son to the title of the property, and you left the home to your son in your will, your son would not assume ownership of the property until after the estate was probated by the court. This would typically take close to a year, even if there were no complications.
While the above can sound great, there are some significant drawbacks to take into consideration. To use our existing example, if your son was to run into legal or tax problems, litigants or tax collectors could target the portion of the home that was owned by your son. That’s right, you would be surrendering half ownership of the home as soon as you add your son to the title, even while you are alive.
This can be quite disconcerting, and that’s not the only drawback of joint tenancy. Since your son would own half of the home, you would not have the freedom to sell or mortgage the home in its entirety on your own.
Thirdly, you may want the home to be liquidated so that its value can be spread among multiple different family members. If you instruct your son to sell the home and distribute the proceeds, he would not be legally compelled to follow these verbal instructions.
These are some things to think about before you embrace the concept of joint tenancy as an estate planning solution.
Free Report on Joint Tenancy
To learn more about joint tenancy, download our special report. This report is free to our readers at the present time, and you can visit this page to access your copy: Joint Tenancy Report.
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.