If you’re taking a look at your asset ownership when creating your estate plan, you may be considering using joint tenancy as a way to own certain assets.  This can be beneficial in many cases, but it has many pitfalls.  We’ve outlined below some information on the use of joint ownership.  If you have any questions, or if you’d like to discuss how joint ownership would affect your estate plan, meet with an estate planning attorney.

What is joint tenancy?

Joint tenancy is a form of ownership in which two or more people own property.  Many people choose to use this type of ownership, especially with real estate.  Joint tenancy is also used with other assets such as bank accounts.  In most cases, married couples choose to use this type of ownership.

What are the benefits of joint tenancy?

One main benefit of owning property jointly with another person is the fact that the asset can avoid the probate process.  Once you die, the property will be transferred to the co-owner without having to go through probate. This is a great way to make sure that your assets are quickly inherited.  It’s also an easy way to title your asset and can quickly give you and another individual access to the responsibilities and benefits of the asset.

What are the disadvantages to joint tenancy?

There are also disadvantages that you should be aware of.  Both owners will share responsibilities and will have constant access to the asset.  This means that it’s especially important to choose someone who is responsible and reliable so no one takes advantage of you when owning property jointly.

Your property will also be subject to creditors if a co-owner is involved in bankruptcy or other financial difficulties.  This means that the property can be taken from you, even though you’ve done nothing wrong.

Children are often unintentionally disinherited, especially if a surviving spouse gets remarried.  And, there is no asset protection granted when you inherit through joint tenancy.

Take the time to carefully weigh out the advantages and disadvantages of joint tenancy before choosing this option.  And talk with a qualified estate planning attorney about whether this option is best for you.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.

The pitfalls of jointly owned property are horrendous.  It is likely that the best way to own your property is in your revocable living trust; but, consult with a qualified estate planning attorney to be sure.  There are times when tenancy by the entirties property may be worth the perils as long as you consider the costs and benefits when planning.

If you own property jointly with your spouse, the property will go to your spouse outright immediately, and by operation of law, upon your death.

On the surface, this may seem like a good thing.  However, if your spouse is not the parent of all of your children, your children may be disinherited.

And, if the property goes outright to your spouse, it has no creditor protection so it can be taken in a subsequent divorce, bankruptcy, business failure, medical crisis, car accident, or slip and fall law suit.  If the property is owned in trust and passes in asset protection trusts, it can’t be seized by creditors.

Moreover, when you own property jointly, you are usually subject to the creditors of your joint owner.  So, if you put your child’s name on your bank accounts for “ease,” they can be taken from you if your child goes through a divorce  or has creditor issues.

The property is also subject to your joint owner’s whims.  All the money can be taken out of your account, you maybe forced to sell your house, or your joint owner (and all 5 of his teenage children) may move in.

You may disinherit your other children.  If you put one child’s name on an account as a joint owner, that child will own that account when you die.  Your other children will receive nothing of that account because it was jointly owned property.

The Potter Law Firm is a member of the American Academy of Estate Planning Attorneys.