Joint tenancy is a subject that is often discussed when people are asking questions about asset transfers. Joint tenancy is a rather fancy term for describing co-ownership of property. You could make someone a joint tenant, and this person would share ownership of your property with you. It should be noted that you could add multiple joint tenants.
There is something called joint tenancy with right of survivorship. This refers to the right of a joint tenant to inherit the portion of the property in question that was owned by a deceased joint tenant.
To provide a simple, stripped-down example, let’s say that you add your son to the deed of your home as a joint tenant with right of survivorship. After you die, your son inherits the entirety of the home. This transfer of assets takes place outside of the legal process of probate.
Probate is time-consuming, and there are expenses that can accumulate during the process. Probate avoidance is appealing to many, and joint tenancy facilitates the transfer of assets outside of probate.
In addition to the facilitation of probate avoidance, joint tenancy can also be useful for those who are concerned about Medicaid recovery.
Many senior citizens rely on Medicaid to pay for very expensive long-term care because Medicare won’t pay for it. Medicaid is a need-based program. Your assets are evaluated by the program to see if you qualify. If you are a homeowner, your home will not count against you, as long as its value is within a rather generous upper equity limit.
However, after you pass away the Medicaid program is required to seek recovery. If you die in possession of personal property it could be subject to attachment.
Technically, joint tenancy should not protect the portion of the property that was owned by the deceased joint tenant under currently existing laws. However, each state takes a somewhat different approach when it comes to recovery. It is possible that the surviving joint tenant could assume full ownership without any portion of it being attached.
Cause to Take Pause
While joint tenancy could serve positive purposes, there is a reason to take pause. You are surrendering sole ownership of your property when you add a joint tenant. This is where the rewards are found, but you also open yourself up to potential difficulties.
What if the joint tenant was to run into financial problems? What if he or she was sued? What if the joint tenant was involved in contentious divorce proceedings? What if you wanted to sell the home and use the money to travel around the world?
Because the joint tenant owns half of the property, it would be subject to attachment, and it would be in play during divorce proceedings. The joint tenant would have to sign off on a sale of the property, and he or she would be entitled to a portion of the proceeds.
Should you create a joint tenancy given the pros and cons? This is something that you should discuss in person with a licensed estate planning attorney.