Joint tenancy is a common form of asset ownership, especially among married couples. It is sometimes used by siblings to own a family vacation home or hunting cabin; and, the elderly often own their assets jointly with an adult child. How you own your assets is extremely important and determines, in part, whether your estate plan works, or not. Check out our joint tenancy facts.
- When we refer to joint tenancy, we mean “joint tenants with right of survivorship or JTWROS.” There are other forms of joint ownership, as well.
- Joint tenancy is riddled with pitfalls.
- Joint tenancy avoids probate, but only on the death of the first to die.
- Tenancy by the entireties, a form of real estate joint tenancy for married couples is available in some states; it provides asset protection.
- Joint tenancy is easy to create.
- Joint tenancy has a survivorship feature. The surviving owner automatically inherits.
- Joint tenancy often causes children to be disinherited.
- Your asset is subject to seizure by your joint owner’s creditors.
- Your asset is subject to the bad behavior of your joint owner.
- If you put a joint owners name on your asset, you have made a gift to that joint owner. This may affect nursing home eligibility and use of some of your lifetime federal estate tax credit.
- If the gift is valued at more than $13,000, you need to file a gift tax return.
- When you gift an asset, you transfer your tax basis. When you die owning an asset, your beneficiaries get a full step in basis. Therefore, gifting will likely result in higher taxes.
- Your will does not control jointly owned property.
- Your trust does not control jointly owned property.
While jointly owned property has some benefits, it’s riddled with pitfalls. Consult with a qualified estate planning attorney to be sure you own your assets properly.
John R. Vermillion & Associates, LLC is a member of the American Academy of Estate Planning Attorneys.