WHY JOINT TENANCY IS NOT ALWAYS THE BEST IDEA: PART 1
May 9, 2013
Most people tend to use Joint Tenancy as a tool to avoid probate in the event that one of the owners of the property passes away. Joint Tenancy also known as Joint Tenancy With Right of Survivorship means that upon death of one of the owners their interest in the property automatically transfers over to the next person who holds title to that property. While this may not seem like much of an issue on the surface, it can create a host of problems.
It doesn’t avoid probate
The probate process is deferred upon death of the first owner as their interest in the assets is automatically transferred over to the surviving joint tenant. However, when the last Joint Tenant passes away the property will be subject to the long and expensive probate process.
Children from a prior marriage are disinherited
Today more than ever people get married multiple times in their lives. If a person gets remarried and holds assets in Joint Tenancy with their new spouse the children from their prior marriage are disinherited. This is an undesirable consequence for many people and if proper estate planning steps aren’t taken this situation becomes unavoidable.
Losing the double tax exemption
When spouses hold a property together they are each entitled to a $1,000,000 exemption. Upon death of the first spouse the estate automatically transfers over to the surviving spouse tax free. However, when the second spouse passes away the taxable estate will only be lowered by $1,000,000. With proper planning the taxable estate could be reduced by an amount of $2,000,000 by utilizing the tax exclusion of both the husband and the wife.
Juliet Gavriel, Esq.
Estate Planning and Elder Law attorney
Practice Limited exclusively to: Wills, Trusts, Estates, Probate, and Medicaid Planning.
Located in Queens: Forest Hills, New York