Many people believe that owning property jointly with rights of survivorship is an effective substitute for a will. The benefit of holding property as joint tenants with rights of survivorship is that such property passes to the surviving joint tenant on the death of the first joint tenant without going through probate. If you arrange your affairs to bypass probate, you may save time and money, as well as keep your affairs private.
However, if your goal is to bypass probate, techniques other than joint tenancy with rights of survivorship exist. For example, you may choose to use a transfer on death direction, in which case you retitle the property using either a transfer on death to (TOD) or pay on death to (POD) registration followed by a designation of the people you want to receive the property upon your death. Title to property that is registered using a transfer on death direction passes by operation of law and no probate is required. In addition, you may choose to establish a revocable trust and transfer your property during your lifetime to your revocable trust. Upon your death, the trust property will be administered pursuant to the terms of the trust and trust law, again without going through probate.
This article is not intended to evaluate the pros and cons of various probate avoidance techniques; instead, it will focus on some of the consequences of an unmarried individual adding a joint owner or owners with rights of survivorship to the title to his/her property.
Many times, a single person will consider having a child assist in the management of his/her property by naming such child as a joint owner of such property. Such an arrangement has several disadvantages.
If a child’s name is added to a parent’s bank account as a joint owner, the following are some of the potential unintended consequences:
If a parent retitles the family home or other real estate in joint names with all of his/her children, the following are some of the potential unintended consequences:
While creating joint ownership with respect to one’s property is simple and inexpensive, it has potential traps, pitfalls and risks. Suffice it to say that a single person who wants to avoid probate should carefully consider the consequences of adding a joint owner to his/her property before doing so. There are other ways to avoid probate. You should discuss with your estate planning attorney these other options before proceeding to retitle your property in joint names with one or more people as joint tenants with rights of survivorship.
Steve Cupples is a practitioner in succession planning for family businesses, including the areas of estate planning, taxation, estate and trust administration, estate and trust litigation, tax controversies and general business. He can be reached at (314) 552-6027.
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