If you hold title to real estate with a spouse or life partner, there’s a good chance the title will contain the words “joint tenants.” When two or more people hold title to property jointly, the deceased owners interest in the property passes to the surviving joint owner(s) according to the “the right of survivorship.” This type of joint ownership can be used for land, automobiles, bank accounts, and some other types of property.
The other common way two or more people can hold an interest in real property is called “tenants in common.” This is more typical in business settings when the owners are not family or in a personal relationship. When a tenant in common dies their interest in the property goes to their estate to be distributed according to their will. If the tenant in common did not leave a will, the property goes to family as determined by state law.
Joint ownership of property has saved many families and couples the burden of probate. This is because there is no need for a court to oversee the transfer of property. The parties intended that the survivor receive the deceased joint owner’s share.
Since this kind of wording placed on a deed or title can cause the property to avoid probate, some people think it’s a free and easy estate planning strategy. But when it comes to estate planning, like most things, you get what you pay for. Relying on joint titles to keep your family out of probate is risky. Here’s a few things to consider:
- If the joint owners die together in a common accident, or close in time, the property will go through probate.
- Upon the death of surviving joint tenant, the property will go through probate. Holding property jointly, without a trust, only delays proper estate planning.
- Families with children from prior marriages are at risk of having their children disinherited if the property goes to the surviving spouse. These mixed families should consider a living trust for protecting their kids in addition to the surviving spouse.
- There can be costly tax implications for the owner who acquires the decedents interest. Anyone thinking about using joint tenancy in lieu of a trust to avoid probate should talk to a CPA or lawyer.
- Many estates involve multiple items of real or personal property that may cause a probate. Attempting to title everything jointly presents the risk of missing an item that will require a probate.
The Living Trust Source recommends that you review titles to your real and personal property, so you are aware of how your property is held. Holding title to property jointly may keep the property out of probate, but it’s by no means a replacement for comprehensive estate planning. Transferring property to a revocable living trust, or executing a transfer upon death deed, both of which will be discussed later in this five-part series, are generally a safer strategies for avoiding probate that relying on joint ownership only.
Attorney at Law
1Source Law & Living Trust Source