Joint ownership can be helpful as well as hurtful
Joint Ownership: Does it make sense for you?
Joint ownership of assets is a way for two or more people to own shares in an asset. The asset generally is real estate but can be other property such as a brokerage account, insurance company products or any other valuable property. The concept of joint tenancy is the transfer of the asset to the survivor or survivors. When one person dies, the asset immediately becomes the owner of the surviving owner or owners. These assets will be transferred without the need of a will or any probate action.
Many different forms of joint ownership are available, but the most common use is “joint ownership with right of survivorship.” This could be effective for spouses or could also be used for transfer between a parent and a child or children.
Property owned in joint tenancy automatically passes without any need for probate to the surviving owner or owners when death occurs to one of the owners. There is no cost to set up joint tenancy other than forms or a small legal expense if an attorney is used. Also, joint tenancy is considered a private issue and the transfer is made without public notice.
Numerous pros and cons of joint tenancy decisions exist. Adding a child to a real estate asset may change the step up in tax basis for the portion of the value of the asset.
This may have a future tax issue for the survivor. Also, adding another person to the ownership of an asset is a gift and once given it cannot be taken back. The value of the gift could also violate gifting laws, and it is essential to understand your gifting options. Understanding the gifting options will offer you more choices in planning.
For more information, visit the NOLO website.
