What Is Joint Tenancy?
First, let’s define just what joint tenancy is. Joint tenancy is a legal term for an arrangement that defines the ownership rights among two or more co-owners of a property. In a joint tenancy, two or more people own property together, each with equal rights and responsibilities.
Why You Should Seek Advice from an Experienced Estate Lawyer
Now I’d like to share why you should seek advice from an experienced Cincinnati estate planning attorney BEFORE you enter into such an arrangement.
Putting your house or any asset in joint tenancy with a child and giving rights of survivorship has legal consequences that few people know. Yet, seniors who rely on their children for assistance often add a child’s name to bank accounts, brokerage accounts, deeds, and other property without realizing the significance of their action or how it alters their estate plan.
It is not uncommon for a senior parent to put a child’s name on one or more assets. Doing so enables the child to write checks, call a broker and assist with account transactions, making matters more convenient for an aging parent.
However, in Ohio, putting an asset in joint tenancy with rights of survivorship is conclusive evidence of an intent to transfer a survivorship interest in the balance of the account’s assets after the death of the parent. It basically tells that child, “I want you to have this asset when I’m gone.” Such transfers can raise problems:
1. They Could Foreclose Your Assets
If after the transfer occurs, your child is sued, goes through a divorce, has a tax lien, loses a job, or declares bankruptcy, you may find that your child’s creditors are now joint owners. In fact, these creditors may be able to foreclose on your assets to get at your child’s fractional share. When you sell the home, you may be only able to use your primary residence exemption (up to $250,000 of the gain on the sale) only on your fractional share. Your children may have to pay long-term capital gains on their shares, which could have been avoided if the house was still titled just in your name.
2. Taxable Gift
Transferring an interest in an asset, in excess of $15,000 per person, in joint tenancy with a child or your children can potentially create a taxable gift under IRS regulations.
3.Lack of Distribution in Assets
Following your death, the probate attorney advises all the children that any child with joint tenancy owns that asset and that the other siblings have no interest in it. Thus, if you add only one child’s name to the account or asset, that child is the beneficiary and legal owner. The other children likely have no right to that asset under Ohio law, even if your Last Will and Testament provided for an equal division of the assets between the children.
Creating a joint with a survivorship interest with a child can thus cause numerous unintended consequences. There are many alternative ways that a parent can arrange for a child to help them manage their assets. An estate planning attorney who has worked with many families can help you avoid the issues involved with placing assets in joint tenancy with a child. That is the best way to assure your peace of mind – and your children’s financial future.
Final Thoughts
Remember: “An ounce of prevention is worth a pound of cure.” When making your estate plans or when probating an estate or administering a trust, do not go it alone. Be sure to engage with a Cincinnati estate planning attorney.
For more information about estate planning, probate, or trust administration in Cincinnati (and throughout the rest of Southwest Ohio) and to review free resources regarding estate planning, probate, or trust administration, visit my website. If you have questions regarding this article or a particular legal matter, feel free to contact me at 513-399-PLAN (7526). David H. Lefton is an Estate Planning and Probate Attorney. He is a partner in the law firm of Barron, Peck, Bennie & Schlemmer.