5 things to know about Joint Tenancies
Putting assets in joint tenancy is an easy way to arrange for assets to pass to people you choose upon your death without having a will. It may work too, but be aware of some facts about joint tenancy.
1. Joint tenancies may not avoid probate—it may just postpone it. In a worst-case scenario, if your assets are held in joint tenancy with your spouse and neither you nor your spouse has a will, the assets will be subject to probate.
2. If you pass away first, you will never know what ultimately happens to the asset. Because the joint owner becomes the sole owner of those assets upon your death, he or she can choose who inherits, regardless of your wishes. You could unintentionally cause the problems that you were trying to avoid in the first place.
3. If your co-owner becomes incapacitated, the court could end up being your new co-owner. This means you could end up having to ask the court for permission to use your own money! When a person becomes incapacitated, often a guardian of the estate is appointed to manage that person’s assets—including those held in joint tenancy.
4. Removing a co-owner from the title of an account is not as easy as adding one. If your co-owner doesn't agree with being removed, you could end up in court. In some instances, the co-owner must also agree before you can withdraw funds from the account or even change the address.
5. If your joint owner is sued over an accident, the jointly owned asset could end up as part of the lawsuit. Likewise, if your co-owner has debts, your joint asset could be seized as settlement.
You may also think that if you name beneficiaries on accounts, you have a solid estate plan. That may not be true. If your named beneficiaries are your minor children, a guardian of that minor child’s estate is appointed by the court to manage that child’s assets until he or she reaches legal age. Further, your beneficiaries are only entitled to the assets when you die. Thus, if you become incapacitated, your beneficiaries will not have access to those accounts. Unless there is also a joint tenant, your beneficiaries may find themselves in court asking for permission to access money to pay your bills.