Is joint ownership a good substitute for a will?

The short answer is probably not.joint ownership

 

Joint ownership is sometimes called the poor person’s will or the lazy will, although it is the most common form of estate planning. Its chief advantage is that it avoids probate. Yet, it brings with it a host of problems. Keep in mind that there are different kinds of joint ownership and all have their problems.

Here are the main ones:

1. The joint owners can be responsible for each other’s debt.

Creditors for your co-owners may attach your jointly owned property to satisfy their debts. Bankruptcy, a legal judgment against a co-owner, or a tax lien are most likely to cause problems. For example, suppose you add your daughter as a joint-owner of your home. If she defaults on a personal debt, your home could be sold to satisfy the debt. You will likely receive half the proceeds of the sale of the house, but you are out of a home with only half the funds you need to replace it. In some states tenancy by the entirety will protect each person from the debts of the other.

2. Your survivor is not bound by your wishes in passing on the joint property after your death.

Your survivor can do anything he wants to with the jointly-owned property he inherits. If you want to control how property is distributed to your children or charities, you need a will.

3. You may need approval from joint owners to sell or refinance the jointly-owned property, such as your home.

When you share ownership through a tenancy by the entirety, every joint owner you have must agree to major decisions. You may have been the sole decisionmaker of your business that you built from nothing. Yet, if you have made your children joint owners, major financial decisions will require their approval. Lines of credit increases and other routine matters can require a lot of discussion. These transactions can be further complicated if one of your co-owners becomes incapacitated or untrustworthy.

4. You co-owner may be able to make key decisions without your approval.

On the other hand, if you use a tenancy with right of survivorship, your co-owners can use or sell any part of the jointly owned property.

5. It can increase taxes.

Uh oh. You were hoping to save taxes through joint-ownership. To the contrary, you could incur additional taxes and even paperwork.

The gift tax

You can incur gift taxes and extra paperwork if you purchase a home with your money and put it in joint tenancy with a domestic partner. IRS rules consider that to be a gift whose value exceeds the gift limit.

Capital gains tax

IRS calculates capital gains on the sale of a home based on the increase in value from the date of purchase. If you sell a home which is jointly owned, all owners must pay taxes based on the total increase in value, regardless of when they became owners. On the other hand, capital gains accrue for heirs only based on the difference between the value when they inherited the home and the value at sale.

If joint ownership isn’t the answer, what is?

There are a number of options to ensure that your property reaches the people or causes you want with the least waste of time, effort and costs. Wills, trusts, and family-owned entities will serve you much better. Check with one of our estate planning attorneys today. A 30-minute consultation is free.

Norman Short, partner, 24 years experience in estate planning business and tax law

Robert Garrison, 38 years experience, including estate planning, consumer issues, and family law

Sylvia Seybold is often the choice of younger families. She combines estate planning experience with family law

Digital estate planning

What are your electronics, blog, and online photos worth?
digital estate planning

You may have worked with an estate planning attorney to carefully plan your family’s financial future. But did you include your digital assets in that plan. The average adult believes their electronics, socially shared content and blog are worth about $50,000. For many of us the most valuable asset is irreplaceable. Our photos and memories that we share on Facebook, Twitter and Instagram.  Other intellectual property may have a market value, a blog with a good following, for instance. Have you made plans for what happens to those when you die?

You probably need to redefine the role of your executor because standard wills and trusts do not address digital accounts.  The laborious process that Facebook requires for family members to get access to the account of a deceased loved one adds significant stress to an already overwhelming experience. Because most social accounts restrict access to the account holder and exclude even an executor without explicit written authorization, it is wise to amend your clause on the executor in your will or estate plan to grant permission.

Digital estate planning for financial information

Do you access your bank and investment accounts online? In addition, your insurance and other key documents may only exist in digital form. Your executor needs easy access to this information to settle your estate and close down accounts. We can’t overemphasize the importance of quickly accessing accounts. The chances of identity theft increase upon death.

Updating your digital estate plan

Do you already have an estate plan drawn up by an experienced estate planning attorney? Then, it will just take a quick meeting with an attorney knowledgeable with digital estate planning to eliminate social media problems for your heirs. At GSJones Law Group, we have three experienced estate planning attorneys. They can quickly add digital estate planning to your existing estate plan. And, if you have not gotten around to estate planning, there is no time like the present.

Norman Short

Bob Garrison

Sylvia Seybold