Estate planning attorneys help people understand how property will be transferred after death, and there are different scenarios that can enter the picture. One of them is the situation that would unfold if property is jointly held by more than one owner.
One form of concurrent ownership is joint tenancy. In order for property to be held in joint tenancy, there must be “four unities” in a legal context: time, title, interest, and possession.
This means that the co-owners must acquire their interests in the property at the same time, they must be on the same title, they must hold equal interests, and they have the right to possess the entire property.
It is possible for a creditor to place a lien on the portion that is owned by one of the joint tenants, and this is definitely a drawback. In order for the property in its entirety to be sold, all of the joint tenants must be in agreement.
Joint tenancy is often discussed in an estate planning context because it comes with right of survivorship. The share of the property that was owned by a deceased joint tenant would be inherited by the remaining joint tenants, and this transfer would not be subject to probate.
Probate is a legal process that takes place under the supervision of a court. It is time-consuming and costly, and is a public proceeding, so there is a loss of privacy.
Tenancy in Common
The condition of tenancy in common is another form of concurrent ownership, but it does not come with right of survivorship. When one tenant dies, their interest in the property would become part of their estate.
With a tenancy in common, there is no equal ownership share requirement. A joint tenant can transfer their interest in the property to someone else, but they would not be a joint tenant; they would become a tenant in common.
Joint Tenancy and Estate Planning
A joint tenancy may be created for estate planning purposes by someone that wants to facilitate a property transfer outside of probate. This sounds like a simple solution on the surface, but there are drawbacks that go along with this approach.
For example, let’s say that you own your home, and you want to leave it to your daughter. You make your daughter the joint tenant of the property when you still have every intention of living in it as usual.
Under these circumstances, your daughter would own half of the property as soon as the document is executed.
Let’s say that your daughter is sued by the Internal Revenue Service because she has outstanding tax debt. A lien could be placed on the property under these circumstances.
Joint tenancy can also apply to bank and brokerage accounts. People sometimes add joint tenants and they give verbal instructions with regard to the way they want the funds to be distributed after their passing. A surviving joint tenant would not be legally compelled to follow the instructions.
There are safer, more efficient, and more effective ways to facilitate asset transfers after your passing. The ideal course of action will depend on the circumstances, and this is why you should discuss your options with a licensed attorney from our firm.
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