Brown & Associates - Attorneys & Counselors at Law, P.L.L.C.

Taking Care of Property Business Now --- Absolute Final Word on Joint Tenancy
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In my earlier columns, I discussed some of the issues you might encounter if you are using or thinking about using joint tenancy as an essential part of your estate planning. Some of the topics I covered were the tax consequences if your co-owner died first, problems if you own property in joint tenancy with someone other than your spouse, and why holding property in joint tenancy with another effectively disinherits you're your children from a prior marriage. This week I'll conclude this series by answering just a few more questions.

"Should I be worried about any other potential problems?"

There are always potential problems when you own property jointly with another. You may disagree about how the property should be managed or what improvements should be made to it. You may argue about how much you should spend on repairs or whether the property should be sold. You may eventually find yourself engaged in expensive litigation because you can't resolve your disputes among yourselves. This happens more often than we care to think about.

Even worse, if you become mentally incapacitated or legally unable to make decisions on your own, your joint tenant could find himself up a creek without a paddle. He can't dispose of the property or take any other legal action without you agreeing and joining in the action with him--and you can't. You can't sign deeds. You can't approve sales. You can't do anything.

Your joint tenant or a family member will first have to go to court and seek appointment as your custodian or guardian. Only after he or she is appointed by a court of law can your designated representative act on your behalf.

A well drafted durable power of attorney will help overcome some, but not necessarily all, of these problems.

Another remedy would be to place your joint ownership interest in trust so your successor trustee can act on your behalf.

One last reason for concern: if either you or your joint tenant file bankruptcy or have other court action brought against you, the court can sever the joint tenancy and effectively destroy your inexpensive estate plan.

"If there are disadvantages to joint tenancies, why do so many people use them?"

Over the years, many people have recommended the use of joint tenancies without fully understanding their problems and complexities. Joint tenancies appear simple to understand, but this simplicity is deceptive. While the advantages of joint tenancy are clear, the disadvantages are equally obscure and not commonly understood.

"If I put all my property in joint tenancy, can I avoid probate?"

As is often the case, my answer must be a qualified "sometimes." Even though title to joint tenancy property passes to the surviving joint tenant or tenants by operation of law, your interest still must be terminated in order to give clear title to the surviving joint tenant. There are several ways to do this.

First, your surviving joint tenant may file an Affidavit of Surviving Joint Tenant, a certified copy of your death certificate, and a tax release from the IRS and OTC with the County Clerk. Fortunately, if you were married to your surviving joint tenant, he or she can avoid one of the steps and will not have to obtain and file releases from the tax authorities.

Second, if your surviving joint tenant is not your spouse, he or she may have to initiate a court proceeding called Termination of Joint Tenancy. This procedure, which is used to clear title, is relatively simple and far less expensive than probating the entire estate.

Finally, if there are other assets to be probated, the surviving joint tenant can have the joint tenancy severed as part of the probate or administration proceedings.

"Does it matter how large or small my estate is at my death?"

Yes. If your estate is relatively small and all your property will pass to your spouse through joint tenancy, he or she may be able to avoid probate altogether.

If your estate is fairly large or your joint tenancy is with someone other than your spouse, your heirs may still be able to avoid probate. To do so, however, they could find themselves spending more time and money than if they had just gone ahead and probated the estate in the first place.

Always check with an estate planning attorney if you are planning on using joint tenancies as an integral part of your estate plan. Your attorney can advise you on the pros and cons of your choice, show you whether it will be cost effective, whether it will accomplish your estate planning goals, and if there are any other alternatives which would be better suited for your particular situation.

"Are Joint Tenancies Ever Recommended as Part of an Estate Plan?"

I know, it sounds as if I am down on joint tenancies, but I'm not. There are many situations in which joint tenancies makes sense. Only a lawyer skilled in the field of estate planning can answer this question for you and only after he or she fully understands your situation. Every client and every estate is different. Consult with an attorney of your choice now and avoid the problems and pitfalls that can befall you in the future.

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