Holding title to assets as joint tenants with rights of survivorship is not a panacea.
Do you have a business partner or a spouse?
Are you trying to determine the best way to divide asset ownership?
Are you considering holding the asset as joint tenants with rights of survivorship?
If so, each of you will own such property equally and the survivor will inherit when the other owner dies.
According to a recent Investopedia article titled “The Benefits And Pitfalls Of Joint Tenancy,” this strategy does have its advantages, but it also has some disadvantages.
What are they?
When you die, the probate court will review your will.
If the will is valid, the court will then instruct debts to be paid.
Any remaining amount is disbursed to beneficiaries per your wishes outlined in the will.
With no will, the court will divide your assets according to the laws of the state.
These proceedings can take anywhere from a few weeks to a few years.
With joint tenancy, the survivor will inherit without having the asset pass through any probate proceedings.
Two people are responsible for the asset.
Any liabilities or benefits are shared.
The asset will not be left in limbo after the death of one partner.
If the surviving spouse or owner has expenses or debts to be paid, he or she can use the funds immediately.
Sharing control can be tricky and a risky business.
It means a consensus much be reached to do anything with the asset.
One party cannot act without the approval of the other.
This can create gridlock.
Frozen Bank Accounts.
The court is still allowed to freeze the account.
If the decedent was in heavy debt, the court may require liabilities to be paid from this account.
The court may also investigate whether the account received contributions from a single or individual party.
The money may not be accessed while the court determines what actions to take.
Partner Asset Control.
When the first spouse or partner dies, he or she has no control over what happens next.
The survivor can sell it or give it to someone else.
If this is a business relationship, you may effectively cut your own family out of receiving benefits from your business.
Are there other options besides joint tenancy?
One alternative is tenancy in common.
What is this?
The asset is divided between the two parties.
One can take action with his or her portion without the approval of the other party.
The asset will not pass to the joint owner.
Instead, it will be passed to heirs through a will.
The surviving partner will be able to access or sell his or her half while the estate of the decedent is in probate.
If the disadvantages of joint tenancy seem to outweigh the benefits, you may want to consider tenancy in common.
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), visit our estate planning website and be sure to subscribe to our complimentary estate planning e-newsletter while you are there.
Reference: Investopedia (March 20, 2018) “The Benefits And Pitfalls Of Joint Tenancy”