ISSUE #23
Joint Ownership

Like many people, you and your spouse may jointly own your family home, a bank account, an investment account or other property. Perhaps you jointly own property with other family members or business partners. When you share ownership of any significant asset with another person, there are some important points to keep in mind:

1. Types of Joint Ownership – There are several types of joint ownership, and each has its own distinct characteristics. If you own any property with others, even with your spouse, make sure you know the type of joint ownership and how it works. Some forms of joint ownership bypass probate, and others do not. Mistakes in selecting the wrong type of joint ownership can have costly consequences for you and your heirs.

2. Joint Tenancy – Under joint tenancy, two or more people own equal shares of an asset. A key feature of joint tenancy is right of survivorship. When one owner dies, his or her share passes automatically to the other joint owners. This can be useful for estate planning purposes because the property bypasses the expense and delay of probate. An asset held in joint tenancy is titled in the names of all owners, followed by the initials JTWROS, which means joint tenancy with right of survivorship.

3. Tenancy by the Entirety – Tenancy by the entirety is similar to joint tenancy, but it is only for married couples. This form of ownership provides some protection from creditors, who may not enforce liens against the property for the debts of one of the spouses. Where allowed by state law, your real estate, bank and brokerage accounts may be titled this way and designated by the initials TBE.

4. Tenancy in Common – Tenancy in common is a form of joint ownership that does not provide any right of survivorship. Any number of people can own varying percentages of an asset as tenants in common. Each owner fully controls his or her share, which may be sold, given away or left to heirs through a will. Tenancy in common, by itself, does not avoid probate.

5. Community Property – A few, mostly western, states allow a form of joint ownership called community property, which applies to assets that a married couple acquired during their marriage. Each spouse owns 50% of each community property asset and controls his or her share. Community property does not normally bypass probate, although California permits community property with right of survivorship.

6. Avoiding Probate – Although joint tenancy does avoid probate, unforeseen problems can arise. If you have children from a previous marriage, they could be disinherited if your assets pass automatically to your surviving spouse. Your will has no affect on property owned in joint tenancy. Even if your spouse fully intends to pass the property along to your children, those plans can be disrupted if you both die at the same time or if your spouse dies shortly after you.

7. Joint Tenancy with Children – Some people consider making a son or daughter a joint tenant, either to avoid probate or for convenience in managing a bank account. This strategy can also lead to unexpected problems. Once you have named a son or daughter as a joint tenant, they have ownership rights. Not only do you lose full control of the asset but your son or daughter can withdraw the funds. Even if they are trustworthy, they could be forced to use some of those funds to satisfy a debt or a divorce decree. Remember, you may need full access to all of those assets during your retirement.

8. Tax Issues – When you add a non-spouse as a joint tenant, you are making a taxable gift. Even if you do not actually owe gift taxes, you may still need to file a gift tax return and reduce your lifetime exemption. You may also be increasing your child’s tax bill, if the property has grown in value. As a joint tenant, they will get a stepped-up basis for only 50% of the property’s value, instead of the 100% they would receive if they simply inherited the property through your will or living trust.

9. Professional Advice - We have covered only a few of the issues surrounding joint ownership, and the laws on joint ownership vary from state to state. Because of hidden pitfalls, you should seek the advice of an attorney regarding any joint ownership arrangement you have or are considering.

This publication has been prepared as an educational resource to help the reader identify areas of potential concern. The publisher is not engaged in rendering legal, accounting or other professional services. The information contained in this publication should not be acted upon without first obtaining the advice of a professional adviser. 2004 © Florida Philanthropic Advisors, LLC. Material may not be used without permission.

You may wish to access NEW information this month at: www.ashland.edu/estate and “click” on “Planned Giving” in the left hand column.

Our planned giving director, Paul Ditlevson, can be of tremendous service in helping you integrate your giving goals with your overall estate plan. He can also help you prepare to visit your attorney. You can reach Mr. Ditlevson by calling 419-289-5090 or by email to pditlevs@ashland.edu or regular mail at 401 College Avenue, Ashland, OH 44805.