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There are many ways to own your assets. Some forms of ownership can even avoid probate without the need for further estate planning. It is natural to want your family to share in the bounty of your hard work. As a way to simplify the transfer process and avoid probate, you may be tempted to add a child or other relative to the deed of your home or title to your bank account utilizing the ownership type of joint tenancy with right of survivorship (JTwROS). While this type of ownership delivers a lot of potential benefits, it may also be masking some dangerous and unforeseen pitfalls. 

Under JTwROS, when one owner dies, the remaining owner(s) inherit the deceased owner’s share of the property proportionately. Its benefits are specific: ownership is transferred automatically without entering probate. Because the property is transferred outside of probate, it is possible to keep this inheritance out of the clutches of creditors of your estate. On the surface, this seems like a smart way to streamline the inheritance process, sidestep creditor baggage, and bureaucratic charges. But the risks may outweigh the benefits. 

Increased Liability 

One of the main problems with JTwROS is that when you enter into this kind of agreement, you open yourself up to additional liability. By adding additional owners to the account, you put your assets on the hook for the other owners’ creditors, ex-spouses and flights of fancy. 

Another problem with JTwROS, as it relates to real estate, is that there are now multiple owners of the property. This means that if something happens on the property, there are more people to sue, and therefore more assets to go after to fulfill the judgment. Also, you must now get the approval of the other owners if you would like to mortgage, refinance, transfer, or sell the property. It does not matter if you are the only one who is occupying the property or paying the expenses, by adding additional people as owners, you are giving away control and adding liability. 

With respect to any bank accounts, once you add an additional owner, that individual, as an owner, has the right to go to the bank and withdraw whatever money is in the account. The bank is merely going to make sure that the individual is listed on the account and will freely turn over your money to him or her. If a joint owner’s creditor serves the bank with a garnishment order, they can also seize the money in the account, even if the joint owner was only added to help avoid probate. 

Disinheriting Loved Ones 

While JTwROS can have some impacts on you, it can also disrupt your estate plan because instead of property getting handed down, it’s handed over. For example, if someone with children remarries and a new spouse is added to the deed as a joint tenant, that new spouse will inherit the property, not the kids or grandkids. Because there’s a new spouse involved, the new spouse’s family will then be the ones to inherit upon his or her death, meaning the whole ‘branch’ of the original family may be disinherited—and not always intentionally! 

Additionally, a properly drafted estate plan will have contingencies in place in case the intended beneficiary predeceases or is not able to receive the property. With JTwROS, if the added owner passes away at the same time, the transfer is thwarted and the property will have to go through probate anyway. Also, the proportionate value of the property belonging to the newly added owner will not go to your beneficiaries, but theirs. 

Questions? Give Us a Call 

Although there are some advantages to a JTwROS, don’t let simplicity or speed be your only measures. It is always important to make sure that you have a comprehensive estate plan that incorporates all of the tools available to make sure that things happen according to plan. Give us a call so we can discuss all of your options and tailor a solution that will best fit your needs.