WHY JOINT TENANCY IS NOT ALWAYS THE BEST IDEA: PART 2
May 13, 2013
If Joint Tenants are not husband and wife then Gift Taxes or Gift tax returns are due
In a situation where a person gifts half of his or her real property or money to any other person besides his/her spouse, the government will deem it be a gift. The person who made the gift is then liable for gift taxes on the amount that was gifted. For example, if a parent decides to put the name of their child as a Joint Tenant on a home the government will view it as it being a gift to the child and the gift taxes will be due on half of the value of the home.
Often people place a significant other or parents place children as Joint Tenants on property or bank accounts. The most common reasons are either to avoid probate or to allow the Joint Tenant to have access to money in the event that it is needed. However, the Joint Tenants creditors can come after the property regardless of wether the Joint tenant made any contributions towards acquiring the asset. The asset could be forcibly sold in order to satisfy any outstanding debts.
Any judgments made against one of the Joint Tenants can be held against the property. Also, if the Joint Tenant is found guilty by the IRS for not paying any relevant taxes a tax lien can be placed against the property.
The Benefits of a Revocable Living Trust
These are just a few problems that people run into with Joint Tenancy. In the long term, it is not a optimal estate planning solution.
A Revocable Living Trust can help people achieve their estate planning goals by avoiding probate, utilizing a married couples tax exemptions, and protects the estate from creditors.
A Revocable Living Trust provides much more flexibility and control in how the estate will be managed. With a Revocable living trust, children from a first marriage are not disinherited if one of the trustors, the creator of the trust, gets remarried. They can also control how and to whom the estate will be divided without any interference from the probate court.
Juliet Gavriel, Esq.
Estate and Elder Law attorney
Practice Limited exclusively to: Wills, Trusts, Estates, Probate, and Medicaid Planning.
Located in Forest Hills- Queens, New York City, New York