Joint Tenancy Pitfalls
There are many ways to own your assets. When you die, it is only natural that you want your family to share in the bounty of your hard work. As a way to simplify the transfer process and avoid probate, you may be tempted to add a child or other relative to the deed or bank account, which is known as joint tenancy. However, while joint tenancy delivers a lot of potential benefits, it may also be masking some dangerous pitfalls.
Under joint tenancy, when one owner dies, the other owner(s) inherit the deceased owner’s share of the property proportionately. Its benefits are specific: ownership is transferred automatically without entering probate. Because the property is transferred outside of probate, it is possible to keep this inheritance out of the clutches of creditors of your estate. On the surface, this seems like a smart way to streamline the inheritance process, sidestep creditor baggage, and bureaucratic charges. But the risks may outweigh the benefits.
The Price You May With Joint Tenancy
One of the main problems with joint tenancy is that when you enter into this kind of agreement, you open yourself up to additional liability. When you agree to a joint tenancy, you put your assets on the hook for the other owners’ creditors, ex-spouses and flights of fancy.
Another problem with joint tenancy, as it relates to real estate, is that there are now multiple owners of the property. You must now get the approval of the other owners if you would like to mortgage, refinance, transfer, or sell the property. It does not matter if you are the only one who is occupying the property or paying the expenses, by adding additional people as owners, you are giving away control.
With respect to any bank accounts, once you add an additional owner, that individual, as an owner, has the right to go to the bank and withdraw whatever money is in the account. The bank is merely going to make sure that the individual is listed on the account and will freely turn over your money to him or her. If a joint owner’s creditor serves the bank with a garnishment order, they can also seize the money in the account, even if the joint owner was only added to help avoid probate.
Disinheriting Loved Ones
While joint tenancy can have some impacts on you, it can also disrupt your estate plans because instead of property getting handed down, it’s handed over. For example, if someone with children remarries and a new spouse is added to the deed as a joint tenant, that new spouse will inherit the property, not the kids or grandkids. Because there’s a new spouse involved, the new spouse’s family will then be the ones to inherit upon his or her death, leaving the whole ‘branch’ of the original family may be disinherited—and not always intentionally!
Questions? Give Us a Call
Although there are some advantages to a Joint Tenancy, don’t let simplicity or speed be your only measures. Give us a call so we can discussing all of your options and tailor a solution that will best fit your needs. For New York City, call us at 212-537-9190 or for New Jersey, please call 908-403-8608 or click here to Contact Us