If you’re looking for a good way to allow your surviving loved ones to avoid probate, you may be told about joint ownership of real estate. While this certainly can be a method to avoid a long probate process, there are some drawbacks as well.
One Example of Joint Ownership Drawbacks
There are a lot of scenarios of how joint ownership can be a drawback when it comes to your estate plan. For example, say a plastic surgeon and his wife are buying a million-dollar home. The loan application includes both names, making a jointly-owned property. While a married couple being joint owners on a home is something that happens probably hundreds of times a day, the plastic surgeon’s job puts him at high risk to be sued. If a lawsuit doesn’t go in his favor, he and his wife could lose that new home. If the wife is the sole owner (on paper), the home wouldn’t be in the lawsuit equation.
What Happens When the Second Owner Dies
To avoid probate, many individuals own property jointly, but that doesn’t ensure probate is avoided forever. When the second individual passes away, the property would go through probate. If the property is jointly owned with “tenants in common,” it would actually go through probate after the first person’s passing. This is why you need to be very careful about joint ownership and your reasons for engaging in it.
Some Other Issues of Joint Ownership
As you go to sign papers with another individual, think about the many drawbacks of joint ownership and consider going another route. For example, a living will could also help you to avoid probate, and there are a lot of other benefits of doing a living will. Some other issues of joint ownership include:
- If you decide you are ready for sole ownership at some point, you would need the other owner’s full cooperation. If he or she is upset or wants to keep partial ownership, you could just be stuck.
- The other owner could transfer his or her portion to someone else without your approval. You could again be stuck with someone you didn’t want to do business with in the first place.
- If you get remarried, there’s a chance your children will not receive an inheritance at all.
- Gift taxes come into play, especially if you add someone to the title at a later time.
Learning More By Contacting a Lawyer
While there are some benefits of joint ownership, many people experience more drawbacks. Contact an estate planning lawyer, like from Yee Law Group, to see whether this is a good plan for you or if you should go another route.