I hear it all the time … “Dan, we found out how to do this on our own without a trust and without a lawyer. We are just going to title all our accounts as joint tenants so we can avoid probate.”
The only advantage to titling accounts as joint tenants is the ease and convenience of transfer at death and probate avoidance. However, the disadvantages of using joint tenancy to avoid probate are numerous:
Major Tax Consequences
When you add a child’s name to the title of an asset (real estate, bank account, etc.) you have made a taxable gift. Your estate tax exemption will have a reduction if the gift is in excess of $15,000. In addition, your cost basis (what you paid for the asset), which is usually a low amount, will be transferred to your child for calculating their capital gains taxes when your child sells that asset.
When you name your child as a co-owner to property, you are subjecting the property to the creditor claims of the child co-owner. There have been many cases where property was seized to pay a judgment by a creditor because the parent did not know about the creditor problems of the child co-owner.
When you put your child’s name on property as co-owner, it is their property. You could lose control of the property to the co-owner. The co-owner could even borrow against the property!
The Co-Owner May Predecease You
What if the Co-Owner child predeceases you? You could find your property passing by Will, Trust, or law to the spouse of your adult child. I recently heard a story where property passed to an adult child’s spouse, and now the surviving spouse is trying to force the sale of property (that belongs to the parent)!
For More Information
With all these issues and potential problems that you could be leaving behind for your family, why would you want to procrastinate any further?
If you have questions about estate planning and estate settlement, please contact our office at (513) 241-0400 or use the contact form available on this website to schedule a time to speak with one of our Estate Planning and Estate Settlement Attorneys. We look forward to hearing from you!