KPM

Trust Protector LTC Expenses Incentive Trusts Gift Tax Return Family Business Succession Planning Special Needs Trust Elderly Parents In Your Estate Plan Beneficiary Designations Turn Down An Inheritance Power Of Attorney Inter Vivos Securities Laws DAPT College-Age Children Do Need An Estate Plan Estate Planning Documents Annual Gift Tax Exclusion CRT Name A Guardian Power To Remove A Trustee Living Trust Owning Assets Silent & Incentive Trusts Payable-On-Death Accounts Reduce your estate tax Executor Art Collection QTIP Trust portability Life insurance Portability Probate Original Will Estate Planning Estate Plan Estate Planning Estate Planning Asset Protection Strategies

Are You Holding a Joint Title to Property with a Family Member or Friend?

Owning assets jointly with one or more of your children or other heirs is a common estate planning ‘shortcut.’ But like many shortcuts, it may produce unintended and costly consequences.

Joint Ownership Advantages
There are two potential advantages to joint ownership: convenience and probate avoidance. If you hold title to property with a child as joint tenants with ‘right of survivorship,’ when you die, the property is transferred to your child automatically. You do not need a trust or other estate planning vehicles and it is not necessary to go through probate.

Joint Ownership Disadvantages
Joint ownership can offer that aforementioned shortcut, but it also can create a number of problems. This is especially true if you add someone as a co-tenant instead of a joint tenant with right of survivorship. The disadvantages can include:

Unnecessary taxes: Adding a child’s name to the title may be considered an immediate taxable gift of one-half of the property’s value. In addition, when you die, the property’s value will be included in your taxable estate, although any gift tax paid with the original transfer would be allowed as an offset.

Creditor claims: Joint ownership exposes the property to claims by your co-owner’s creditors or a former spouse.

Loss of control: Your co-owner may be able to dispose of certain property without your consent or prevent you from selling or borrowing against certain property.

Unintended consequences: If your co-owner predeceases you, his or her share of the property may pass according to his or her estate plan or the laws of intestate succession. If you hold the property as co-tenants, instead of joint tenants with the right of survivorship, for instance, you will generally have no say in the ultimate disposition of that portion of the property.

A Trust May Be the Answer
If your goal is to avoid probate, one or more properly drafted trusts can help to avoid the problems outlined above. If you jointly own assets with family members or friends and have concerns about probate, please contact us.

Related Articles

Talk with the pros

Our CPAs and advisors are a great resource if you’re ready to learn even more.