Hi there. My name is Bridget Mackay. I am an estate planning attorney in Petaluma, California, and I also practice in elder law.
Today, I want to talk to you about a bad estate plan. It’s called ‘joint tenancy’. Joint tenancy is a form of co-ownership during the lives of two or more people. It is used as a plan, whether you know it or not, because when one joint tenant dies, the remaining joint tenants, or if there’s only two, the remaining joint tenant, immediately succeeds in ownership to whatever asset they held in that form, without the need of a probate. On the plus side, this plan allows you to avoid probate, or the expense of creating a trust. Sometimes that’s why people knowingly go into these relationships. Some people don’t know they’re in it, because if you’re a husband and wife, and you own a bank account, that’s considered a joint tenant account, or a brokerage, or anything else. And sometimes if you’ve purchased your home, it was so long ago that you purchased it as a joint tenant with your spouse.
What are risks of having this as your plan for disability or death? Well, in the case of real property, you can expose it to creditors. One of the most common examples I see is a mom who is a widow, or single, and is worried and wants to make sure that a child inherits their house, puts their child on the deed to their property. If the child goes bankrupt, gets in an accident, or is sued, then half of her home is exposed to those creditors from the bankruptcy or the accident. In the case of bank accounts, sometimes children are also added for convenience, to create a joint tenancy. It could be added even to a married couple who are aging, who think, “Oh, I want my children to get to the money soon, if something happens to us, or one of us.” And you run into the danger, in the case of bank accounts or brokerage accounts, of unauthorized withdrawals from the child, or at death, title will vest in that remaining child who’s on the joint tenant bank account with you, which may be contrary to how you wanted the estate to be divided amongst maybe other children.
It’s often best to avoid joint tenancy, and form a living trust, to avoid probate. A trust can designate how assets are used in incapacity, and how they’re distributed at death. It provides emergency funds, and protects assets from creditors and others seeking to get to the money of potentially a joint tenant child. And it is a simple method of avoiding probate and the risks of joint tenancy that I’ve outlined. So consult a qualified estate planning attorney before you decide to transfer assets into joint tenancy, or take on a child on one of your accounts or your house.