It is said that a little bit of information can be a dangerous thing, and this certainly enters the equation when it comes to estate planning. There are those that share bits and pieces of what they think they know, and there may be some truth in the mix. However, an incomplete picture is often painted, and this can yield negative consequences in the long run.
One of the first things you should understand about estate planning is the fact that a will is not administered without supervision.
Yes, you would have the ability to name an executor to serve as the administrator after you pass away, and you would state your final wishes in a legally binding manner. The executor would handle the administrative tasks, but it would be done under the supervision of the probate court.
There are some drawbacks that go along with the probate process, and we look at them on this blog from time to time. Without going into a great deal of detail for our purposes here, suffice to say that it is time-consuming and expensive. Privacy is lost as well, because anyone that is interested can access probate records.
For these reasons and a handful of others, people often decide to facilitate asset transfers outside of probate. In some instances, they embrace “simple solutions” that they hear about from non-professionals, and this is one of the situations that people fall into that can lead to a world of hurt.
Joint Tenancy With Right of Survivorship
Now that we have shared the necessary background information, we can look at joint tenancy. If you own your place of residence, you could add someone else to the title or deed, and they would become a co-owner. This is the condition of joint tenancy, and it comes with right of survivorship.
What is right of survivorship you ask? This would allow a surviving joint tenant to absorb the ownership share that was held by the deceased joint tenant. The transfer would not be subject to the probate process, and this is why some people are under the impression that this is an ideal estate planning solution.
It all sounds good on the surface, but there are some huge problems lurking right beneath it. Let’s say that you name your daughter as the joint tenant, and she makes a mistake behind the wheel of her car. The other driver suffers devastating injuries, and she is the target of a huge lawsuit.
Since she is half owner of the property in question, the litigant seeking redress could go after this portion. A similar situation could exist if there was a tax lien imposed or some other type of enforceable collection effort. Short of this type of thing, if you ever wanted to sell the property, you would need the cooperation of the joint tenant.
Here is another scenario that is not entirely uncommon. Someone hears about the concept of joint tenancy, and their home is their most significant asset by far. They want to keep things simple, so they add one family member to serve as the joint tenant.
The person that has been added to the deed is instructed to sell the home and share the proceeds with multiple different heirs after the passing of the true owner. From a legal perspective, there would be nothing compelling the surviving joint tenant to follow these verbal instructions.
Download Our Estate Planning Worksheet!
This blog is chock-full of useful information on countless different estate planning and elder law subjects, so you can learn a great deal if you explore it regularly. In addition to this treasure trove, we have a number of other resources on this website that you can access free of charge.
One of them is our estate planning worksheet. It has been carefully prepared to help you understand the process more thoroughly, and we urge you to take the time to go through it. You can access your copy right now if you visit the following page: Free Estate Planning Worksheet.