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Why Joint Tenancy is Not The Answer - From Scottsdale Attorney

By June 16, 2012Estate Planning

I met with a widow, who I will call “Mary”, who came to see me because she wanted to add her child as a joint tenant on her home.  When I asked Mary why she wanted to do this, Mary stated she did not want her home to go through probate.  Mary’s primary concern was ensuring her child receive the home when she dies.  While adding a child to a home as a joint tenant with rights of survivorship is a way to avoid probate, I have concerns with such a strategy.

.When someone is added as a joint tenant to a property, they are now also an owner of the property.  If Mary utilized this strategy, she would not be able to sell her home without her child’s consent.  Mary’s child would have the right to encumber the property as well as sell their own interest in the property without Mary’s consent.  Additionally, any creditors of Mary’s child can go after the home as a way to satisfy outstanding debts.  A final concern I have with such a strategy is that it is a completed gift and Mary cannot take it back without her chid’s consent.  Thus, Mary could not add her child to the home and then a few years later remove the child’s name, unless the child gives permission.

There are better alternatives for Mary, all of which carry out her primary concern of avoiding probate, but also allow her to maintain exclusive ownership of the property. One of my suggestions to Mary was the use of a beneficiary deed.  A beneficiary deed allows the owner of real property to designate who receives the real property at the owner’s death.  To effectuate the transfer, a death certificate must be filed with the appropriate county recorder.  A beneficiary deed avoids probate which was Mary’s primary concern.  A beneficiary deed also provides Mary with flexibility – she is still the sole owner of her home so she can sell it, mortgage it, etc if she chooses.  Mary also has the ability to revoke the beneficiary deed if she decides someone other than her child should receive the property.

My other suggestion to Mary was the use of a revocable living trust.  Mary’s rights to her home stay the same even once it is titled in a revocable living trust.  She has the right to sell it or mortgage it.  Because the home is titled in a trust when Mary dies, the home is not subject to probate.  This accomplishes Mary’s goal of probate avoidance.  The use of a trust also gives Mary the ability to provide her child with additional protections.  Mary could leave the house to her child in a beneficiary trust which has asset protection.  Thus, if Mary’s child has creditors, they could not take the house as a way to settle the outstanding debts.

Mary ultimately decided to create a trust for herself.  She appreciated the ability to provide her child with additional protections.

Phoenix Attorney, Estate PlanningContributed by MH attorney and partner Katherine A. O'Connell

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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.

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