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The Pitfalls of Joint Tenancy: Should I add another person to title?

5/16/2016

Joint Tenancy remains a popular form of property ownership as people tend to elect this form of ownership to avoid probate. Many of my clients stated that when they bought a house, they chose to create a joint tenancy without really going any further as to what that entails. Joint tenancy with right of survivorship means that each person owns the entire asset (undivided equal share), not just part of it. When one owner passes away, the person's share immediately passes to the other owners in equal shares, without going through probate. We’ve all been told that joint tenancy can be a simple and inexpensive way to avoid probate, and this is sometimes true.

But careful consideration should be made for the potential tax consequences and other problems of joint tenancy ownership. Here are some of the disadvantages of joint tenancy which far outweigh the advantages:

Property passes to unintended heirs: A person's Will or Trust does not control who will get it after he or she passes away.
There are no planning opportunities: If you become disabled, your joint tenancy property may be tied up in a guardianship or conservatorship proceeding.
Probate is at best delayed, not totally avoided: Joint tenancy passes outside all of your planning and avoids probate, but only on the death of the first joint tenant. In the case of a married couple, the first spouse will avoid probate. But when the surviving spouse dies, there will be a probate.
For non-spousal owners, unintentional gift taxes and death taxes can be generated: Often times, a parent designates a child as a joint tenant on the property. Once they are added, the transfer of property may very well be a gift that might have to be reported to the IRS. In some cases, a gift tax may have to be paid. When the parent dies, the child inherits the property, no matter what the parent's Will or Trust says.
Selling or Encumbering Property Difficulties: Joint Tenancy makes it more difficult to sell or refinance because it requires the agreement of both parties, which may not be easy to get.
Creditors: Joint tenancy is subject to being attached by creditors of either joint tenant. Often times, a parent will name a child as a joint owner on the property for convenient purposes and to avoid probate on the death of the parent. However, the child's creditor can attach any property or assets that the child owns jointly regardless of whether the child contributed any funds or live at the property. And vice versa. The parents' creditors can attach and the child may suffer the consequences.
Court Judgments: If any owner has a judgment/settlement entered against him, such as from a car accident, business dealings, or divorce proceeding, the judgment holder can execute the judgment against the home or include the home in the settlement.

Joint Tenancy does have its advantages, such as:

Simple, easy to understand
Inexpensive to create. You don't need to hire an attorney usually.
Avoids probate
Property may be free from claims of creditors of the deceased joint tenant if no prior lien was attached.
Reflects a relationship commitment.

Before placing your property in a certain type of ownership, I highly recommend becoming familiar with all types of property ownership and taking into consideration your objectives and consequences to your heirs.

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Prince's Legacy - Did he leave a Will?

5/10/2016

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City Pages

At the age of 57, Prince died unexpectedly in his home at Paisley Park. He left fans worldwide in shock and sadness, but he also left behind his estate that is reportedly worth at least $250 million. And his could be worth even more with his posthumously sold albums. In the four days after he passed, he sold 650,000 albums (both digital and physical), according to Nielsen Music.

The questions that now remain are who will have control of his estate? Who will make the decisions about his unreleased recordings? Who will inherit his real estate? His earnings?

According to The New York Times, Prince died intestate, meaning without a will. His sister, Tyka Nelson, filed court documents with the Carver County District Court in Minnesota to request the Court to appoint a special administrator to preserve Prince’s estate until a personal representative is appointed. Shortly after, Bremer Trust, NA, a corporate trust company, was appointed by the Court, giving the company authority to manage and supervise Prince's assets and identify his heirs.

Ms. Nelson’s court petition state that Prince died without a current spouse, kids, or surviving parents. She also states in the documents that “I do not know of the existence of a will.”

If no will or other estate planning documents turn up, Prince’s surviving family members (ie. Ms. Nelson and his half-siblings) may have to go through a costly, drawn-out family battle over his financial estate and his legacy. Because of a lack of estate planning, it is likely more than half of his estate will be paid in estate taxes and legal fees in order to determine who will inherit.

Putting an estate plan is so important to protect your loved ones and to save them the time, headache, and money in handling your estate. Please make sure you and your family have some kind of planning in place in case something happens to you.

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The Pitfalls of Joint Tenancy: Should I add another person to title?

Prince's Legacy - Did he leave a Will?

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