Joint Ownership of Real Property–Use Only With Supervision

Owning real property (real estate) as Joint Tenants with Right of Survivorship is easy, common, and should come with a parental warning label. It’s possible, even with the best of intentions, to disinherit both minor and adult children.

There are several forms of joint ownership, but the one most people use for real property (and the type we’ll look at here) is called “Joint Ownership with Right of Survivorship.” This means that when one owner dies, the jointly owned property automatically, by operation of law, transfers to the surviving owner.
Joint ownership is a very common way for married people to own their homes and other property.
Joint ownership is also commonly used by aging parents and their adult children.

Joint Ownership Can Postpone Probate
In many cases, joint ownership postpones probate rather than avoiding it. If the surviving owner doesn’t add a new joint owner—or place the property in a trust—before he or she dies, it will eventually go through probate before distribution to the heirs. Or, if the joint owners die at the same time, the property will go directly to probate at that point.

Joint Ownership Can Unintentionally Disinherit Your Children
Most parents are surprised to learn that assets titled as “Joint Tenants with Right of Survivorship” are not controlled by their Will or Trust. Even if the Will or Trust directs that you want someone specific to receive your share of a jointly owned asset, it will still go to the surviving owner.

The transfer of ownership takes place immediately upon the death of either joint owner. If you are the first owner to die, you simply can’t control what happens to that asset after your death. The surviving owner can do whatever he or she wants with the entire asset.

Here’s an example:
After Robert died, Joan owned their vacation home outright. She remarried a few years later, and she added her new spouse’s name to the title. When Joan died, her children learned that the new husband now owned the property—even though their father had always promised it would stay in the family and go to the three of them.
If you add a spouse as a joint owner who is not the parent of all of your children, any children from a previous relationship will be disinherited with regards to the jointly owned assets.
If you add one child as a joint owner, you will disinherit your other children who are not named joint owners.

Other Possible Risks of Joint Ownership
While it’s easy to add a co-owner’s name to a title, taking someone’s name off a title can be tricky. If the person does not agree, you could end up in court.
Your assets are exposed to the other owner’s debts and obligations (and they to yours). For example, if you add your adult son to the title of your home and he is successfully sued, you could be forced to sell your home to pay for his judgment.
If you need to sell or refinance the jointly-owned asset, and your co-owner is incapacitated, you’ll have to ask the court to appoint someone to sign for your co-owner (unless proper legal measures were taken in advance to mitigate such a situation). And, once the court gets involved, it usually stays involved to protect the incapacitated owner’s interest until the incapacity ends or the person dies.
There could be potential gift and/or income tax consequences.

Joint ownership of real property with another—a sibling, life partner, business partner, child, or even spouse—can potentially put that property at risk. If you have concerns about jointly-owned assets, we can review your estate plan and/or asset ownership, explain what will happen to the assets in the event of your disability or death, and suggest ways to ensure that your estate plan works as you intend.

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