“I don’t have a lot of money, so I’ll just add my kids to my (bank account) (title to my home) (title to my car) etc.” This is a common refrain from those who think they are not wealthy enough for an Estate Plan. Wealth does not determine whether you should have an Estate Plan, but rather what type of Estate Plan you should have. However, joint tenancy is not the way to go.
Simply put, assets owned in joint tenancy means that each person owns the entire asset. Therefore, any joint tenant can withdraw or sell the property at any time without the permission of the other joint tenants. Furthermore, if one joint tenant dies, any interest the deceased joint tenant had in the asset disappears and full ownership is vested in the remaining joint tenants.
Property in joint tenancy passes to the surviving joint tenant or tenants upon death. This may lead to unintended beneficiaries receiving property or unequal distribution among your heirs. Furthermore, even if you assumed your joint tenant would share, that is not always the case.
Property in joint tenancy can also be subject to claims by creditors of any of the joint tenants. Therefore, you may have added a child or friend’s name to an account only for convenience purposes, but creditors will not see it that way.
Property in joint tenancy can also lose significant tax advantages. For example, there may be income or gift tax issues when a surviving joint tenant who is not a resident holds title to the property and sells or upon the sale of certain types of other assets.
Property in joint tenancy can work in limited circumstances, but the pros and cons should be discussed with your attorney and thoroughly considered so that these assets can be part of the larger Estate Plan.
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