Joint tenancy is a common estate planning tool used to avoid probate. Unfortunately, joint tenancy can cause more problems than it solves if used without consulting an attorney or to avoid making a comprehensive estate plan.
What is Joint Tenancy?
Joint Tenancy is a method of titling assets giving each person ownership of the whole asset. Joint Tenancy is commonly used for real property (e.g. houses) and bank accounts.
Why is Joint Tenancy used?
Joint Tenancy is used to share control, access, and ownership of an asset. A special kind of Joint Tenancy called “Joint Tenancy with Rights of Survivorship” is used primarily as an estate planning tool to avoid probate.
Potential Pitfalls:
Unfortunately, titling your assets in joint tenancy without advice or help from an attorney can result in traps for the unwary that can undo the potential benefits of joint tenancy or cause more problems.
- Titling in Joint Tenancy with a Minor
Margaret wanted to make sure her children would have a home if something happened her, so she titled her home in joint tenancy with rights of survivorship with her three children. Margaret did not think about the title to her home again until after two of her children moved out of the home. With only one dependent, her 16 year old, she decided she wanted to sell the home for a smaller house she could maintain in her later years.
The Problems: Margaret created two problems by titling her home in joint tenancy as her estate plan. First, Margaret needs all three of her children to sign the deed and the contract to sell the home. Second, one of Margaret’s children is still a minor and can’t sign the deed or the contract. The court will need to appoint a guardian to sign the contract and the deed on the minor’s behalf.
The Solution: Rainey Law, LLP could make a custom estate plan for Margaret that gives Margaret full control of her home, distributes her home to her children after Margaret passes away, and appoints a guardian if any of her children are minors when she passes away.
- Joint Tenancy without Rights of Survivorship
Jerry and Danielle recently purchased their new home. In their excitement, they didn’t notice the deed transferred title to the home to Jerry and Darla as joint tenants without mentioning survivorship.
The Problem: In Oklahoma, if there is no survivorship language, there is no survivorship. This means if Jerry or Danielle die, the survivor will not automatically own the entire home, requiring a probate for half the home.
The Solution: Rainey Law, LLP could draft a deed transferring the home to Jerry and Danielle with rights of survivorship. Rainey Law, LLP could also make an estate plan for them, to ensure is probate is not required if they pass away simultaneously or after the survivor of them passes away.
- Unagreeable Joint Tenants
Shortly before he passed away, a father transferred his home in joint tenancy with rights of survivorship to himself, his son, and his daughter. After the father died, the daughter wanted to keep the home, but the son wanted to sell the home.
The Problem: If the son and daughter cannot reach an agreement, a court may partition (physically divide) the real property or force a sale to a third party.
The Solution: Rainey Law, LLP could make a custom estate plan providing the trustee discretion on how to distribute the assets to the beneficiaries, allowing the Trustee to distribute the home to the daughter and monetary assets to the son.
- Untrustworthy Joint Tenants:
A mother wanted to make sure her son had sufficient funds to pay for textbooks, food, and other necessities while attending college. She titled her bank account in joint tenancy with her son, thinking this would provide his sufficient funds for college and make sure he was taken care of if something happened to her.
The Problem: A joint tenant is a joint owner of the whole asset. By titling the account in joint tenancy, the mother lost control over how her son uses the money in the account. The son could deplete the entire bank account and spend the money on whatever he wanted, because he is a joint owner.
The Solution: Rainey Law, LLP could make a custom estate plan with an education trust for the son. This allows the mother to control her bank account, allocate money for her son’s education, and ensure her son will have money for his education if she passes away while he is in school.
We’re happy to help you avoid joint tenancy pitfalls with a custom estate plan. Complete our convenient online and confidential estate planning worksheet now, and we’ll contact you to schedule a free consultation at our offices. For more information on how we can help you get your estate planning done, see Estate Planning Made Easy with Rainey Law, LLP.
