The Dangers of Owning Property in Joint Tenancy
“Joint Tenancy with a right of survivorship” renders the transfer of property between co-owners when one dies. For instance, if two co-owners hold the title of the property as Joint Tenants, when the first co-owner dies, the property becomes the sole property of the surviving owner. At this point we understand that when the first of the two Joint Tenants dies, the right of survivorship ensures that the asset will transfer to the surviving Joint Tenant without going through the grueling Probate process. However, what happens when the resulting owner dies? Probate.
If the surviving Joint Tenant had a will that outlined their intention as to who they wanted to inherit the asset, the asset itself would still be subject to probate. Joint Tenancy in its essence does not avoid probate, it just holds is off. Joint Tenancy makes the transitions very smooth from two Joint Tenants to one after the death of the first. That is where it ends.
For some reason, people think they can “beat” the probate system by adding another person to title as a Joint Tenant. Commonly we see a surviving spouse adding one of the children to title as a Joint Tenant. The expectation is, that after the death of the second parent, that the surviving Joint Tenant will divide the property among all the children—even though there is no legal obligation to do so. Additionally, that surviving Joint Tenant (in our example, the child) could face gift tax implications if they shared with the siblings (since he or she is at that point giving away what is legally theirs). Some may think, okay, add all the kids as Joint Tenants to eliminate the possibility of that one child not sharing with his or her siblings. By adding all the kids as Joint Tenants, the parents would be exposing themselves to substantially devastating outcomes. Remember, each Joint Tenant owns a 100% undivided interest in that asset during their lifetime. This means when one Joint Tenant has a problem such a car wreck, divorce, bankruptcy, outstanding child support, and so on, the creditor can take the entire property, not just a fractional share!
If you have any questions or would like additional information, please do not hesitate to call (559) 389-5070 or email us at email@example.com .