When you look into the postmortem process that will be initiated after you pass away you will invariably learn some things about the process of probate. Probate is a legal proceeding that can be time-consuming and expensive. For this reason, probate avoidance strategies are often implemented.
An overly simplistic probate avoidance notion that some people buy into is the utilization of joint tenancy with right of survivorship.
Co-Ownership of Property
The term joint tenancy with right of survivorship is a rather wordy way of describing the condition of joint ownership of property. If you were to pass away as the sole owner of a piece of property, the transfer of this property would be subject to the probate process.
On the other hand, if you add a joint tenant or co-owner to the title of the property, this person would become the sole owner after you die. The transfer of your share in the property to the joint tenant would take place outside of the process of probate.
It should be noted that you can add more than one joint tenant to the title of your property.
Pitfalls of Joint Tenancy
When you hear the basic explanation of joint tenancy you may come away thinking that this is a good solution for you. All you have to do is name your children as joint tenants and you have successfully avoided probate.
In fact, there are some significant pitfalls that can come along with this course of action. For one thing, what if you wanted to sell the property and go forward with the proceeds independently? This can be problematic, because the joint tenant would have to sign off on the sale. And, he or she would have a right to his or her share of the proceeds even if the joint tenant did sign off on the sale.
Because the joint tenant enjoys equal ownership, the property that is held in joint tenancy could be attached by the joint tenant’s creditors. Tax liens could be placed against the property. A divorce settlement could include a division of the joint tenant’s share of the jointly held property.
These are just a few of the multiple difficulties that can arise if you place property into joint tenancy in an effort to avoid probate.
Free Report on Joint Tenancy
This was a brief look at joint tenancy with right of survivorship. To learn more about it, we would like to invite you to download our special report on the subject.
The report is available to our readers absolutely free of charge. To obtain your electronic copy of the report, simply take a moment to click this link and follow the simple instructions: The Trouble With Joint Tenancy.
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.