Eliminating the need for probate is a goal for many
clients. Joint tenancy, a form of co-ownership, is one tool that can help
achieve this goal.
When one co-owner dies, his interest in the real property
automatically passes to the surviving co-owner, thereby, eliminating the need
for probate. Joint tenancy can, however, have its perils and must not be
entered into lightly.
Control Issues: By providing someone with
co-ownership, you give them control of your asset. For example, if you add
another person as co-owner of your home, you cannot sell or mortgage the home
unless that person agrees.
Creditor Issues: If creditors seek out
your co-owner for outstanding debts owed, the creditors may be able to obtain
part of your home or bank account held in joint tenancy.
Relationship Issues: If you and your
co-owner experience a falling out, the co-owner may be able to take all of the
money out of the bank account.
Substitute for Will Issues: Parents of
several children may place one child’s name on an account and assume she will
divide assets equally among all siblings. Unfortunately, this method provides
no stipulations over control of the money. The surviving co-owner can do with
it what she pleases, with no legal obligation.
Tax Issues: Careful planning to eliminate
or reduce estate taxes can be completely thwarted by a joint tenancy that
passes property outright to a surviving joint owner.
Long-term Care Issues: Thoughtful planning
to reduce long-term care financing can also be thwarted by a joint tenancy that
passes property outright to a surviving joint owner.
Marriage
Issues: Individual property may become marital property once it is
transferred into a joint tenancy.
For more
information about estate planning in Torrance, CA, please visit my website.