People often set up bank accounts and real estate so that they own it jointly with a spouse or other family member. The appeal of joint tenancy is that when one owner dies, the other automatically inherits the property by right of survivorship, without the property having to go through probate. Joint ownership of property is perceived to be easy because bank accounts can be opened as joint accounts and when buying real estate, title can simply be taken as joint tenants.
However, joint ownership can also cause unintended consequences. And it’s worth considering some of these, before deciding that joint ownership is the best way to pass on assets to your heirs. Below are three of the common problems that can arise.
The other owner’s debts become your problem. Any debt or obligation incurred by the other owner could affect you. If the joint owner files bankruptcy, has a tax lien, or has a judgment against them, your property could be seized to collect that debt. Although “your” equity of the property won’t necessarily be taken, the property could be sold so the creditor can collect your co-owner’s equity.
Your property could end up belonging to someone you don’t intend. Some of the most difficult situations come from blended families. If you own your property jointly with your spouse and you die, your spouse gets the property. On the surface, that may seem like what you intended, but what if your surviving spouse remarries? Your home could become shared between your spouse and his/her second spouse. And this gets especially complicated if there are children involved: Your property could conceivably go to children of the second marriage, rather than to your own.
You could accidentally disinherit family members. If you designate someone as a joint owner and you die, you can’t control what that person does with the property after your death. Perhaps you and an adult child co-owned an apartment building. You may state in your will that the apartment building should be equally shared with your spouse or divided between all of your kids; however, ownership goes to the survivor – regardless of what you put in your will.
These decisions are too important and complex to be left to chance. If you need help deciding the best way to manage your property to meet your needs and goals, just give us a call. We’ll listen to your concerns and help you develop an estate plan that gives you peace of mind and achieves the goals you have for your family.