It has become fairly common for elderly parents to add their children as "joint tenants with rights of survivorship" on the family home. So, what is wrong with that?
First, the positive outcome intended: when children become co-owners of the home right now, then when the parents pass away the home passes by operation of law to the children without triggering probate. True, this may work just fine.
as recently discussethe need for probate. While this often sounds like a good idea, consider the costs.
A recent TCPalm article, titled “Understanding the Pitfalls of Joint Tenancy,” points out the biggest potential problems.
When your children are co-owners of your home or other property, they have the same rights in the property as you. Your child could block a sale of the house. If your child is a co-owner of your bank account, he or she could withdraw money from the account. All of it. You might think your child is in a good financial position now, but what if that changes? Your property could become subject to your child's creditors, to include a future former in-law. Additionally, there might be gift tax consequences to the joint tenancy.
Do not misunderstand, joint tenancy is not improper in all circumstances. However, depending on your objectives, you really should consider other options.
For example, you can use trusts as a way to avoid probate or even pay on death options for financial accounts. When it comes to your home, Kansas and Missouri non-probate transfer laws provide for a "beneficiary deed" to effect the transfer ... but only postmortem. Alternatively, consider creating a last will that provides for "independent" administration to streamline the probate process itself.
In the end, be sure to consult an experienced estate planning attorney regarding which options are the best for you before you consider making your children joint tenants.
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
For more information about estate planning in Overland Park, KS (and throughout the rest of Kansas and Missouri) and to download free tools to help you organize your estate, visit my estate planning website.
Reference:TCPalm (July 2, 2014) “Understanding the Pitfalls of Joint Tenancy”