In past articles I discussed the problems that you could experience when you add someone to your real estate or bank account as a joint tenant. In summary: (1) once you add someone onto your property, you have created a joint owner of the property with an immediate ownership interest in the property. By giving someone immediate ownership, your joint owner and his or her creditors can use your property for their own purposes. (2) You cannot remove a joint owner from your property without the joint owner’s permission. (3) There may be serious tax consequences associated with the transfer. Today I want to share with you some of the problems that could occur after you pass away and you have used joint tenancy (instead of a living trust) as the method to transfer your wealth.
The good news is that by using joint ownership your wealth will be transferred without having to go through a court probate proceeding. The bad news is that you no longer have any control over how your wealth is used or spent after you pass away. By adding someone as a co-owner on your property, you lose the opportunity for estate planning because the property becomes the sole property of the surviving joint tenant at the moment of your death. Anything you may have written in a will does not change that result!
I know of several cases that involve parents making one of their children a joint tenant on their property because they trust that child to “do the right thing” -- divide the money with other family members, make sure the funeral and other financial matters are handled, etc. Unfortunately, people and relationships change. For any number of reasons (usually greed), in some cases the “trusted one” looks out only for his or her own interests and refuses to correctly or timely share the property or otherwise carry out the parent’s wishes. In some cases it happens that the “trusted one” has good intentions but passes away before making the proper distribution of the property. For example, suppose you put your married daughter on your bank account or your real estate as a joint tenant, then you pass away and unexpectedly she passes away shortly after you. In that situation, the property will go to her heirs, which probably include her husband. Maybe he will share everything fairly with your other children, grandchildren, and other heirs. Maybe not.
Proper estate planning includes doing your best to make sure that your desires, goals, and dreams for your wealth are carried through. Most people want to divide what they have among their children fairly. Maybe you want to also set some money aside to help your grandchildren through college or you just want to limit the amount of money your heirs can have access to on an annual basis. The real question is why leave all of this to chance when proper estate planning can help you make sure that your desires for your wealth are carried through. A revocable living trust can help you accomplish your goals.
© 2023 by Marlene S. Cooper. All rights reserved. (You may obtain further information at the website www.marlenecooperlaw.com, by e-mail at MarleneCooperLaw@gmail.com, by phone at (626) 791-7530 or toll free at (866) 702-7600. The information in this article is of a general nature and not intended as legal advice. Seek the advice of an attorney before acting or relying upon any information in this article).