Although joint tenancy offers some short-term conveniences, in the long run it poses a host of problems that can cost you and your loved ones multiple times the expense and headaches that you thought you were avoiding.
For the vast majority of American couples, “till death do us part” also means, “till death do we hold property in joint tenancy.”
It happens almost automatically. When you and your spouse open a checking account, buy a car, purchase a home, or acquire just about any other asset you can think of, the first — and usually only — impulse is to put the title in both your names as joint tenants.
Married couples aren’t the only ones relying upon joint tenancy. This ownership strategy is widely used by friends, life partners, parents and their children, among others. It’s an ownership method so pervasive that many consumers often say they know of no others.
Joint tenancy is commonly used because it appears to be “easy”. Many married couples use it erroneously to avoid probate. While others add kids, friends, life partners, parents and other individuals to their accounts to “help” with paying the bills and managing the finances.
What all too many people unfortunately overlook is the fact that joint tenancy only temporarily avoids probate while bringing with it a slew of problems that more than override any short-term convenience it provides. In fact, joint tenancy can end up costing you and your loved ones many times the expense and headaches you thought you were avoiding.
Here are just a few of its disastrous consequences:
- Joint tenancy may avoid probate at the first death, but upon the death of the surviving joint tenant, the entire estate will have to pass through probate.
- Joint tenancy means that the first person to die loses all control as to whom or how his or her assets will ultimately be distributed.
- With joint tenancy, spouses lose the benefit to fully use the federal estate tax exemption.
- In Arizona and New Mexico as well as other community property states, joint tenancy may expose assets to capital gains taxes that could have been avoided.
- When the joint tenants aren’t husband and wife, gift taxes and/or gift tax returns may be due.
- Joint tenancy exposes one joint tenant to the financial risks, liabilities, and other potential problems suffered by other joint tenants.
There are several different options rather than owning property as joint tenancy. A qualified estate planning attorney can guide you through the pros and cons and create a proper estate plan that accomplishes your estate planning goals and objectives while protecting those you love.