Joint Tenancy and Joint Tenants with Right of Survivorship, are forms of property ownership in which, upon the death of one of the owners, all of the deceased owner’s interest transfers immediately to the surviving owners. Married couples generally own assets in Joint Tenancy. If you and your spouse have a joint checking account, and/or own a home or car in both of your names, then you likely hold these assets in Joint Tenancy.
Why is Joint Tenancy so common? Many people hold assets in Joint Tenancy to avoid Probate. When a Joint Tenant dies, his or her share immediately passes to the surviving Joint Tenants. This transfer of ownership occurs by operation of law and avoids Probate and the need for a Will.
However, Joint Tenancy is not without the potential for problems. Here are some of the problems associated with Joint Tenancy:
- Joint Tenancy only avoids Probate at the death of the first joint owner. When the remaining Joint Tenant dies, the asset will pass through Probate.
- With Joint Tenancy, you lose control over how your assets will be distributed upon your death.
- The federal estate tax exclusion is forfeited if the assets go to your surviving spouse.
- In community property states (Arizona, California, Idaho, Louisiana, Nevada, Texas, Washington and Wisconsin) Joint Tenancy will expose your assets to capital gains taxes that could have been avoided.
- If joint tenants are not married, gift taxes may be due when the Joint Tenancy is created.
- Joint Tenancy exposes all tenants to the financial liabilities and creditors of all the other tenants.
While Joint Tenancy may be a good estate planning solution for some, it is not the best solution for all. At Morris Hall, PLLC we understand the importance of estate planning and concentrate our practice exclusively in this area. We know you have worked hard for what you have, and we are here to assist your family in making sure your legacy continues how you want.
This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.