Pros and Cons of Joint Tenancy
Owning your property with another person is called a joint tenancy. While there are certain benefits to owning a property this way, there are also certain drawbacks. In most cases, a joint tenancy boils down to the property’s right of survivorship. If one owner were to pass away, the other owner would take full control of the property. The co-owners of the property all have a right to use and enjoy the property.
There are requirements that need to be met in order to create a joint tenancy. Co-owners need to be on the same deed at the same time, have equal ownership interest, and take over the property at the same time.
One of the advantages of a joint tenancy is the ability to avoid the probate process. If a co-owner has a limited amount of other properties and assets, or they are disbursed through a trust when they die, it may be possible to avoid probate. This will avoid long and possibly costly court appointments, and allow the process to play out smoothly.
In cases where a divorce or separation occurs, joint tenancy makes getting out of the property easy, one person’s stake needs to be sold to the other, and the joint tenancy ends.
Another advantage involves rental income that comes from a property owned through joint tenancy. All owners are entitled to the profits from rent or profits the property generates.
There are also disadvantages. For instance, creditors may be able to claim the property after a co-owner passes, in order to pay off the person’s debts. This usually occurs if the person had credit issues, or declared bankruptcy while they were still alive. The property may also be seized by creditors from a bankrupt partner. A co-owner being sued or going through a divorce may also impact the property.
A joint tenancy also carries more responsibility, as the owners involved are responsible for taxes, mortgage payments, and all maintenance and repair costs.
In cases where the partner is not a spouse, issues can arise. For instance, if a child is made the joint tenant on a property, it may be deemed a gift, and there be a need for a gift tax return to be filed, along with the possibility of paying those taxes.
Shares of the property can also be sold without the other co-owner’s consent, which can lead to problems. If a partner decides to sell their share of a property in order to pay off a debt, you may end up being in a joint tenancy with a stranger.
Another disadvantage involves passing the property down to family members. When a person in a joint tenancy dies, they simply cease to own the property. It is not passed down.
Other problems involve being in a joint tenancy with people you do not get along with. This can make even the most mundane tasks with the property difficult, as personal issues can interfere.
Should You Do It?
Whether a joint tenancy is worth it depends mostly on the relationship you have with a possible co-owner. If the relationship is strong, and you have trust with the person, that might limit some of the disadvantages that come with the arrangement. If you do not have those things with a prospective partner, it may be worth looking into other avenues. Either way, an experienced estate planning attorney at The Mattar Firm will be able to offer advice, and lead you in the right direction. These are big, important decisions to make, and an attorney well-versed in the law will be in a position to help you sort through it all.
Contact The Mattar Firm
At The Mattar Firm, our elder law attorneys can help with your estate planning needs. Contact our experienced estate planning lawyers today at 239-222-2222.