Avoiding Probate with Joint Tenancy
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What Is Joint Tenancy?
Joint tenancy is a form of ownership where two or more people own equal shares of the property. The ownership rights of each joint tenant includes the right of survivorship. So, if any of the joint tenants passes away, then the surviving tenants will automatically get a share of that joint tenant’s interest.
How Does Joint Tenancy Avoids Probate?
The right of survivorship aspect of joint tenancy will automatically transfer the deceased joint tenant’s property to the surviving joint tenants. Instead of going to probate court, the surviving joint tenants merely need to fill out a form and bring a death certificate to the keeper of ownership records (i.e. a bank, department of motor vehicles).
Limitations of Joint Tenancy
There are a few limitations with joint tenancy ownership, and they mainly concern the elderly. The major limitations include:
- The last surviving joint tenant cannot use joint tenancy to avoid probate because there are no more survivors. Thus, she must use another method to avoid probate. If the last surviving tenant does not do anything when she inherits the entire interest of the property, then the property will go to probate when she passes.
- If both joint tenants die at the same time, right of survivorship will not take effect and each owner’s shares will pass as in their wills.
- If one joint owner becomes incapacitated and does not sign a "Durable Power of Attorney," then the other joint tenant will be restricted in his decisions.
Drawbacks and Complications
Using joint tenancy to avoid probate will have some drawbacks and complications.
- You should keep in mind that you are merely giving property away if you change ownership from sole owner to joint tenants. Additionally, gift tax may be assessed if the value of the transfer is over the federal allowable limit. In 2013, the limit was $14,000.
- Using joint tenancy to avoid probate may cause disputes after death. Many elderly are unaware of the implications of the documents they sign. For example, an elderly may want to have a caretaker deposit her checks into her bank account and not necessarily make the caretaker a joint tenant.
- If the surviving joint tenant is a spouse, she may be unaware of a big tax break if she sells the house.
Consulting an Attorney
An estate attorney will know the pros and cons of owning property as joint tenants. And if your major concern is avoiding probate, the lawyer can help you draft different legal documents, as you desire without having any unforeseeable effects.
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Last Modified: 10-03-2016 09:29 PM PDT
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