You may have heard of something called joint tenancy with right of survivorship. People sometimes claim that the utilization of this type of legal arrangement is a good way to plan your estate.
Let’s look at the facts.
What Is Joint Tenancy?
Sometimes there are wordy terms that describe things that are not especially complicated when you break it all down. This is true of joint tenancy with right of survivorship.
A joint tenant is a co-owner. Let’s say that you own your home outright. It would be possible for you to add someone to the deed as a joint tenant.
From an estate planning perspective, this individual would assume full ownership of the place of residence after you die. The transfer would take place outside of probate.
If you don’t know anything about probate, it is a legal process. If you die in sole personal possession of property and arrange for its distribution through the terms of a will, the estate must be probated. We have discussed probate in different blog posts. Suffice to say that it can be time-consuming and expensive, so people often try to avoid it.
Problems With Joint Tenancy
When you read the above, you may come away thinking that joint tenancy sounds like a pretty good solution. However, there are some potential problems to take into consideration.
One of them is the fact that the joint tenant that you add to your property becomes a part owner of the property immediately. As a result, the property could be attached by litigants seeking satisfaction from the joint tenant.
In addition to someone who may be suing, this would extend to tax liens and divorce proceedings. In other words, the joint tenant’s financial problems become your problems.
Another thing to consider is the fact that the joint tenant would have to agree if you wanted to sell the property. And, he or she would be legally entitled to half of the proceeds if there was in fact just one joint tenant holding half interest.
The joint tenant is going to inherit all of the property after you die. As a result, it is not in his or her best interests to approve the sale.
There is also the disinheritance factor. Suppose you add a joint tenant to your property because it is something that is simple to do. You tell the joint tenant to sell the property after you die. You explain how you want the proceeds distributed.
Legally, the joint tenant is not compelled to follow your verbal instructions. The property would be solely owned by the joint tenant with no strings attached. He or she may decide to do something entirely different with his or her property.