Should you use a Joint Tenancy to avoid probate?
Authored by: Anisha D. Rutkowski
You may have heard that to avoid probate, you can simply add your child’s name to the ownership of an asset, such as real estate. It is true that by creating a “joint tenancy with right of survivorship,” you may own your home with your child during your lifetime and, upon your death, ownership of the property will pass in its entirety to your child, without any estate planning or hassle of the probate process. While this tactic sounds straightforward, is certainly legal, and may accomplish your probate avoidance preference, it may also give rise to complications that you did not anticipate.
First, you must consider that joint ownership of property may expose the property to your child’s creditors, may have various tax ramifications, and limits your control with regard to selling the property during your lifetime. It is important to keep in mind that the type of joint tenancy contemplated above cannot be reversed without the agreement of each owner.
You should also consider that a change of circumstances, heightened emotions, or simply greed may prevent the property from being distributed as you anticipated. Consider a husband and wife with three adult children, who wish for their home, upon their death, to be distributed in equal shares to their three children. One of their children lives nearby, and they decide to add this child’s name to the deed of their home as a joint tenant with right of survivorship. Their understanding with their children is that upon their passing, the joint tenant child will sell the home, divide the proceeds into thirds, and distribute a third of the proceeds to each of his two siblings. Of course, husband and wife trust that their joint tenant child will do just as they wish. However, once they have passed away, any number of factors could interfere with their plan.
First, consider that wife passes away first and husband and child’s relationship becomes strained. Husband and child must now continue to own the property together, unless both agree to sever the joint tenancy. And even under circumstances where the child maintains a solid relationship with both parents, difficulties may arise after both parents have passed away. For example, the joint tenant child may have taken a more active role in the care of the aging parents and now feel entitled to all the proceeds. The joint tenant child may have financial troubles that the child wants to use the proceeds to satisfy. The joint tenant child may have a soured relationship with the siblings and simply refuse to share the proceeds. Any of these circumstances presents significant risk that husband and wife’s intent in creating the joint tenancy will not be carried out. Such a risk may easily outweigh the benefit of the joint tenancy as contemplated.
There are a multitude of complications, aside from those mentioned here, that may arise when using joint tenancies to avoid probate. And many of those complications can be avoided by proper estate planning. Contact our office today to learn more about probate avoidance and accomplishing your asset distribution goals.