A Real Estate Attorney Can Help You Avoid These Mistakes
Many people believe they can avoid probate by adding another person’s name to their property. Although this generally works well for spouses, it can be problematic for individuals who add an adult child or other relative as a joint tenant. If you own your property with another person as “joint tenants with right of survivorship”, you may not be as protected as you think. A real estate attorney can help you avoid these mistakes.
You May Still Need Probate
Contrary to what many people believe, a joint tenancy does not truly do away with the need for probate; in most cases, joint tenancy just delays probate until the second (or, in cases of several joint tenants, the last surviving joint tenant) passes away. If you own your property as joint tenants (with right of survivorship) or as a married couple as “tenants by the entirety”, it’s true that a surviving tenant automatically inherits a deceased tenant’s share. When the remaining tenant dies, however, the property must pass through probate – assuming the surviving tenant has not made arrangements for the property to pass directly to an heir (as with a transfer on death deed).
Most people tend to think of estate planning as something for the very old. In reality, younger people are more likely to die in unexpected accidents, such as car crashes. If you and your joint tenant – such as a spouse – die together, your heirs must probate two estates.
If you have children from a previous marriage, an experienced real estate attorney will tell you that titling your property with your new spouse can have the effect of disinheriting your kids. Upon your death, your property will pass directly to your new spouse, who can then pass the property on to whomever he or she wishes – and it may not be your children.
Many people fail to understand the serious tax implications of joint tenancy. Specifically, a joint tenancy does not necessarily help individuals avoid estate and gift tax liability. When the first tenant passes away, it is possible for all or part of the property to be counted toward the deceased’s assets – and taxed if the decedent’s total assets exceed exemption limits.
Disagreements about Sales
When two or more people own property, they must all agree to sell or encumber it. If, for example, several siblings own property inherited from a parent, each sibling must agree on a sale price and sign off on the transaction. If one person has a sentimental attachment to the property or disagrees about the sale price, it can create serious inter-family conflict. Our real estate attorney has worked with many families in this situation.
Many elderly people assume it’s a good idea to add an adult child as a joint tenant. When they pass away, their child will inherit the property. The problem with this arrangement is it exposes the property to the child’s creditors. If the child runs into financial difficulties, his or her creditors can put a lien on the property and possibly even force foreclosure. If the child files for bankruptcy, the property might have to be sold to satisfy the child’s creditors.
An Owner’s Incapacity
Your real estate attorney will tell you that joint tenancy – especially between a parent and adult child – also raises concerns about coerced sales, whereby a joint tenant child unduly pressures an incompetent or ailing parent into signing off on a sale.
Springfield, Missouri Estate Planning & Real Estate Attorneys
Fortunately, there are ways to protect yourself – and your property – from the potential pitfalls of joint ownership. Contact a real estate attorney at the Law Office of Randy L. Smith, LLC to discuss your goals. Call (417) 841-2775.
This website has been prepared by The Law Office of Randy L. Smith, LLC for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.