Problems with Assets Passed Through Joint Tenancy
Joint tenancy is a form of ownership under which two or more parties share equal rights in property. Upon the death of one of the parties, or “tenants,” the survivor’s interest in the property continues. Titling assets in joint tenancy is popular because it is a simple way to pass assets; however, there are several issues or potential problems a tenant may encounter.
Holding an asset in joint tenancy does not protect the asset from tenants’ creditors. If a judgment is levied against any one tenant, the entire value of the asset could be used to satisfy the judgment. This can pose lifetime, as well as post-mortem, problems.
Joint tenancy may also generate gift tax issues. The creation of joint tenancy in real property may be viewed as a taxable gift by the IRS. Cash assets (i.e. joint tenancy bank accounts) may become gifts when funds are withdrawn by a non-contributing tenant. Understanding applicable tax law is crucial when creating this type of interest.
There are several other tax and practical implications to consider when creating a joint tenancy interest. The nature of the asset, as well as the financial standing and relationships among tenants are all important considerations. The attorneys of Morris Hall are experienced in these types of property transfers and offer free consultations to discuss your estate plan.
Contributed by Morris Hall Phoenix Estate Planning Attorney Andrea Claus.
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