Michigan Estate Planning Blog

The Perils of Joint Tenancy Saginaw, Michigan

Eliminating the need for probate is a goal for many clients. Joint tenancy, a form of co-ownership, is one tool that can help achieve this goal. When one co-owner dies, his interest in the real property automatically passes to the surviving co-owner, thereby, eliminating the need for probate. Joint tenancy can, however, have its perils and must not be entered into lightly. Control Issues: By providing someone with co-ownership, you give them control of your asset. For example, if you add another person as co-owner of your home, you cannot sell or mortgage the home unless that person agrees. Creditor Issues: If creditors seek out your co-owner for outstanding debts owed, the creditors may be able to obtain part of your home or bank account held in joint tenancy. Relationship Issues: If you and your co-owner experience a falling out, the co-owner may be able to take all of the money out of the bank account. Substitute for Will Issues: Parents of several children may place one child’s name on an account and assume she will divide assets equally among all siblings. Unfortunately, this method provides no stipulations over control of the money. The surviving co-owner can do with it what she pleases, with no legal obligation. Tax Issues: Careful planning to eliminate or reduce estate taxes can be completely thwarted by a joint tenancy that passes property outright to a surviving joint owner. Long-term Care Issues: Thoughtful planning to reduce long-term care financing can also be thwarted by a joint tenancy that passes property outright to a surviving joint owner. Marriage Issues: Individual property may become marital property once it is transferred into a joint tenancy.

JOINT OWNERSHIP - HIDDEN PITFALLS TO AVOID

Estate planning can be daunting. Once you get past the fact that your very mortality (and morbidity) is the triggering event, estate planning means taking stock of all you own and, what is often more important, how you own it. Yes, there are many degrees of ownership and each can make for some difficult wrinkles. One common phenomenon is joint ownership between generations. Not only is it common, but it can make for some unintended problems. Forbes recently ran a piece on some of these problems and the five reasons to avoid such ownership form. Let’s review some of the high points, but I would commend the full article to your reading file. Joint ownership oftentimes is an attempt to simplify things, or at least that is why people use it as a means of holding title. Perhaps they want to simplify practical day-to-day financial management. Aging parents needing such help may add an adult child’s name to a bank account or investment, either for direct aid or for just assisting in managing the accounts or assets. Likewise, it could be done as an attempt to avoid probate. Adding the adult child’s name to the account, investment, or real estate as a form of will-substitute (a so-called “poor man’s will”). Of course, these are only simple solutions, and may actually work, when things go off without a hitch. One problem to remember is joint-ownership is a two-way street. That means that adult child joint owner has equal ownership rights to the assets and so do any of that adult child’s financial predators. The adult child may have their own creditors, may be facing an acrimonious divorce, or may be sued for damages in civil court. In addition, while no parent would anticipate it, the adult child may use the jointly owned bank account for a “quick loan” when they are running a little short of cash. Any of these unintended consequences can not only jeopardize the financial independence of an aging parent, but can cause hard feeling among other adult children who may (or may not) be joint owners with their parent. Another problem, especially from an estate planning perspective, is that joint ownership as a stop-gap or a will-substitute is not really estate planning and may run afoul of the parent’s actual estate distribution wishes. For example, the adult child who has joint ownership doesn’t have to share such assets upon the parent’s death. As you can imagine, it is very easy for such cases to spill over into family squabbles and even prolonged court-cases. Sometimes joint ownership seems like a good idea and a quick fix to avoid probate. And, sometimes it is. Before you use joint ownership as a form of titling your assets, however, consider the drawbacks. In the end, an estate planning attorney can help you determine whether joint ownership is appropriate under your unique circumstances. Remember: Look before you leap. The protection of your assets and family relationships are at stake.

You can learn more about Joint Ownership in the January issue of our free e-newsletter, “Joint Tenancy Troubles.” Visit our website and sign up to receive this valuable update for free every month.

Reference:  Forbes (September 13, 2011) “Top 5 Reasons to Beware of Joint Ownership Between Generations”

JOINT OWNERSHIP - HIDDEN PITFALLS TO AVOID IS JOINT OWNERSHIP.

Estate planning can be daunting. Once you get past the fact that your very mortality (and morbidity) is the triggering event, estate planning means taking stock of all you own and, what is often more important, how you own it. Yes, there are many degrees of ownership and each can make for some difficult wrinkles. One common phenomenon is joint ownership between generations. Not only is it common, but it can make for some unintended problems. Forbes recently ran a piece on some of these problems and the five reasons to avoid such ownership form. Let’s review some of the high points, but I would commend the full article to your reading file. Joint ownership oftentimes is an attempt to simplify things, or at least that is why people use it as a means of holding title. Perhaps they want to simplify practical day-to-day financial management. Aging parents needing such help may add an adult child’s name to a bank account or investment, either for direct aid or for just assisting in managing the accounts or assets. Likewise, it could be done as an attempt to avoid probate. Adding the adult child’s name to the account, investment, or real estate as a form of will-substitute (a so-called “poor man’s will”). Of course, these are only simple solutions, and may actually work, when things go off without a hitch. One problem to remember is joint-ownership is a two-way street. That means that adult child joint owner has equal ownership rights to the assets and so do any of that adult child’s financial predators. The adult child may have their own creditors, may be facing an acrimonious divorce, or may be sued for damages in civil court. In addition, while no parent would anticipate it, the adult child may use the jointly owned bank account for a “quick loan” when they are running a little short of cash. Any of these unintended consequences can not only jeopardize the financial independence of an aging parent, but can cause hard feeling among other adult children who may (or may not) be joint owners with their parent. Another problem, especially from an estate planning perspective, is that joint ownership as a stop-gap or a will-substitute is not really estate planning and may run afoul of the parent’s actual estate distribution wishes. For example, the adult child who has joint ownership doesn’t have to share such assets upon the parent’s death. As you can imagine, it is very easy for such cases to spill over into family squabbles and even prolonged court-cases. Sometimes joint ownership seems like a good idea and a quick fix to avoid probate. And, sometimes it is. Before you use joint ownership as a form of titling your assets, however, consider the drawbacks. In the end, an estate planning attorney can help you determine whether joint ownership is appropriate under your unique circumstances. Remember: Look before you leap. The protection of your assets and family relationships are at stake.
Reference:  Forbes (September 13, 2011) “Top 5 Reasons to Beware of Joint Ownership Between Generations”

JOINT OWNERSHIP - HIDDEN PITFALLS TO AVOID

Estate planning can be daunting. Once you get past the fact that your very mortality (and morbidity) is the triggering event, estate planning means taking stock of all you own and, what is often more important, how you own it. Yes, there are many degrees of ownership and each can make for some difficult wrinkles. One common phenomenon is joint ownership between generations. Not only is it common, but it can make for some unintended problems. Forbes recently ran a piece on some of these problems and the five reasons to avoid such ownership form. Let’s review some of the high points, but I would commend the full article to your reading file. Joint ownership oftentimes is an attempt to simplify things, or at least that is why people use it as a means of holding title. Perhaps they want to simplify practical day-to-day financial management. Aging parents needing such help may add an adult child’s name to a bank account or investment, either for direct aid or for just assisting in managing the accounts or assets. Likewise, it could be done as an attempt to avoid probate. Adding the adult child’s name to the account, investment, or real estate as a form of will-substitute (a so-called “poor man’s will”). Of course, these are only simple solutions, and may actually work, when things go off without a hitch. One problem to remember is joint-ownership is a two-way street. That means that adult child joint owner has equal ownership rights to the assets and so do any of that adult child’s financial predators. The adult child may have their own creditors, may be facing an acrimonious divorce, or may be sued for damages in civil court. In addition, while no parent would anticipate it, the adult child may use the jointly owned bank account for a “quick loan” when they are running a little short of cash. Any of these unintended consequences can not only jeopardize the financial independence of an aging parent, but can cause hard feeling among other adult children who may (or may not) be joint owners with their parent. Another problem, especially from an estate planning perspective, is that joint ownership as a stop-gap or a will-substitute is not really estate planning and may run afoul of the parent’s actual estate distribution wishes. For example, the adult child who has joint ownership doesn’t have to share such assets upon the parent’s death. As you can imagine, it is very easy for such cases to spill over into family squabbles and even prolonged court-cases. Sometimes joint ownership seems like a good idea and a quick fix to avoid probate. And, sometimes it is. Before you use joint ownership as a form of titling your assets, however, consider the drawbacks. In the end, an estate planning attorney can help you determine whether joint ownership is appropriate under your unique circumstances. Remember: Look before you leap. The protection of your assets and family relationships are at stake. You can learn more about Joint Ownership in the January issue of our free e-newsletter, “Joint Tenancy Troubles.” Visit our website and sign up to receive this valuable update for free every month.

Reference:  Forbes (September 13, 2011) “Top 5 Reasons to Beware of Joint Ownership Between Generations”