Using Joint Tenancies to Avoid Probate
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A joint tenancy with right of survivorship can be a useful probate avoidance tool. Under these arrangements, both tenants are entitled to full use of the jointly-titled assets during their lives (to the extent their use is not inconsistent with the other joint tenant?s use and enjoyment of the property. At the moment of death, the deceased tenant ceases to have an interest in the asset and it is immediately vested in the surviving tenant.
Joint tenancies with right of survivorship avoid probate because the property passes automatically to the joint tenant at the death of the first tenant to die. Although the joint tenant may need to file something in the land records or provide a death certificate to third parties, the jointly-titled asset does not pass through the probate estate of the deceased tenant. The jointly-titled asset passes to the surviving beneficiary outside of the deceased tenant?s will or revocable trust. Retirement plans and IRAs are governed by beneficiary designations and cannot be held in joint tenancy.
Joint tenancies can be a dangerous estate planning device. The person named as a joint tenant becomes an immediate co-owner with immediate rights to the jointly-titled assets. For bank accounts, one joint tenant usually has the right to withdraw the entire account. If the joint tenant is untrustworthy or is a poor asset manager, the property titled in the joint tenancy is placed at risk. Joint tenancies do not provide an opportunity to plan for coordination of a person?s affairs at their death, such as paying taxes on the property and debts of the estate.
Joint tenancies can also cause adverse tax consequences. The act of naming a joint tenant is often considered a gift if the tenancy is not revocable (as is usually the case). Unless the joint tenant is a spouse, this can result in gift tax if the joint-tenant?s share of the property exceeds the annual exclusion amount. For personal residences, non-spousal joint tenancy interests can cause the loss of income tax exclusions that are available upon the sale of the home if the joint tenants do not meet the age requirements or reside in the residence.
Joint tenancies are also risky from an asset protection point of view. Titling the assets jointly opens the door to claims of co-owners, their creditors, and, in the event of a divorce, spouses of the co-owners. Because the signature of all joint tenants is generally required under state law, your ability to deal with the property could be thwarted by an uncooperative joint tenant. This can be especially risky if the property is held by multiple joint tenants.
Although these disadvantages make joint tenancies unsuitable as a primary estate planning devise, joint tenancies can play an important role in an overall estate plan. When used in combination with a more flexible probate avoidance devise, such as a revocable trust, joint tenancies can be an effective tool to achieve your goals.
http://www.mississippi-probate.com - Mississippi lawyer specializing in probate, wills, trusts, and estate planning. Visit http://www.mississippi-probate.com/Avoiding-Mississippi-Probate.htm to learn more about avoiding Mississippi Probate and http://www.mississippi-probate.com/Executor-Role.htm to learn more about Mississippi executor duties.
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