San Diego Estate Planning Lawyer Blog
Joint tenancy is a type of ownership where two or more people share an interest in personal property or real estate, usually with a right of survivorship. Three brothers, for example, may decide to purchase a hunting cabin together and own it in joint tenancy. The last surviving brother will eventually own the cabin. Couples who purchased homes 10 or 20 years ago were often advised to hold the property in joint tenancy with a right of survivorship so that when one spouse died, the other received the property. There are occasions where joint tenancy may be the correct way to hold title, however, there are also many potential problems with joint tenancy which you should realize before holding assets in that manner.
Loss of Control – When you own property with other individuals, you give up unilateral control such as the right to sell, make improvements, or refinance. In the example above, one of the three brothers who own the cabin jointly, wants to sell it. He needs the consent of the other 2 to sell and he cannot sell his interest without their consent.
Problems with Creditors – Creditors of a joint owner can come after the property to satisfy the debts of one of the joint owners. If a joint owner has a judgment rendered against him, the creditor can seek to satisy the judgment by forcing a sale of the property.
Tax Issues – By using joint tenancy over a trust, a husband and wife may be forfeiting certain tax benefits that would be available with a properly drafted trust. Also if you put someone on title with you as a joint tenant, a gift tax return may have to be filed.
Loss of Flexibility – A joint owner receiving an asset as the surviving owner receives the asset outright and cannot spread out the distribution over time. For example, if an 18 year old receives an inheritance from a joint checking account upon the death of the co-owner, he will receive the entire account, unlike with a trust where distributions can be spread out over time.
Possible Loss of Public Benefits – A joint owner who is receiving public benefits such as Medi-Cal can be disqualified from receiving those benefits if he receives an asset in his own name. The way to leave property and other assets to such an individual is to leave it to them in a special needs trust.
Deciding to hold assets in joint tenancy is a decision that you may want to discuss first with an experienced estate planning lawyer.