This week I was reminded once again of the problems associated with joint tenancy. Many Americans believe joint tenancy is a great form of estate planning. It allows you to avoid death probate when one joint tenant passes away. However, you still have a death probate problem when the remaining joint tenant passes away. You can also have problems if you want to pull equity from the real property or if you wish to sell it.
The following is a true example of how joint tenancy fails as an estate planning tool. Bob and Mary, a married couple, owned their home in joint tenancy with right of survivorship. Mary died. Bob was grateful that the home was owned as joint tenants as he did not have to open a probate proceeding to take control of the house. He automatically became the sole owner of the property. He was so pleased with this result that he decided to add his only child, Jim, to the title of the house as a joint tenant. Several years passed. Bob met Susan and got remarried. As they are getting older, they decided it would be more appropriate for them to be in a smaller home. Bob decided to sell his home and use the proceeds to purchase a new, smaller home. The problem is that Jim will not agree to the sale of the home. Without Jim’s consent, the property cannot be sold. Unfortunately, this situation ruined the relationship between father and son.
Bob could have avoided this problem by creating a revocable living trust to own the property. Bob would have maintained sole control of the property during his lifetime and the property would have transferred to his son outside of probate upon his death. By using joint tenancy as his estate plan, Bob not only lost control of his home but also lost a very important relationship.
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