Jointly Owned Property in Your Estate Plan
Jointly owned property, or joint tenancy, is a common form of ownership among households and even businesses. Since it may be a central focus of your assets, it will become important when you begin planning for your estate after you have passed away. Understanding how joint tenancy affects your beneficiaries and the probate process can help you establish an estate plan.
Joint tenancy refers to the ownership of property by two or more people. The property is therefore shared equally between all the owners. When an owner dies, all the other owners receive the deceased’s portion of the estate. Real estate is the most common form of joint tenancy.
Types of Joint Tenancy
You’re probably familiar with homes being a main form of joint tenancy. This makes sense if a couple decides to purchase a home together and a half of the house becomes equally owned by each spouse. There are several other forms of joint tenancy that you might encounter as well. Bank accounts, business property and vehicles can all be jointly owned by several people.
Owners of Joint Tenancy
A married couple might vouch to share a house between the two of them. A parent may want to incorporate their child as a partial owner of some of their estate in the case that they pass away. Business partners may invest equally in real estate or other assets. Each of these scenarios makes for joint ownership between at least two people, and should one pass, the other(s) obtains their share.
A big plus of joint tenancy is in its ability to avoid probate. Unlike a will or other trusts that must be verified through the lengthy probate process, a case of joint tenancy avoids it. Instead, ownership is automatically transferred from the deceased to the other living owner.
The main downside to joint tenancy is the gift taxes. These are steep taxes that come with a gift where the receiver has not contributed to the original ownership. Spouses are the exception because they can give gifts to each other tax free. Others are not so lucky, and they must pay taxes upon receiving ownership.Joint tenancy can be beneficial for many people building a relationship or a business, but it is not for everyone. In some cases, it can have cons that make it a worse choice. Make an appointment with an estate planning lawyer, like one at Yee Law Group, PC, to discuss your own situation and see how your joint tenancy might affect your prospects.