Estate Planning and Joint Ownership
Estate Planning Law Firm in O’Fallon, Missouri
People who make out an estate plan often do so with an eye toward avoiding probate, and with good reason. The probate process can tie up assets indefinitely, requiring inheritors to wait months, and sometimes years, to access their rightful property.
One way of avoiding the probate process is through joint ownership of assets. When two or more people hold an undivided interest in a property, the surviving owners automatically inherit it, bypassing the probate process entirely.
On the surface of it, this seems like an effective way to avoid probate. However, it can lead to unintended consequences that can further complicate the process.
1. Delaying the Inevitable
In the short term, joint ownership avoids probate, but in the long term, all it really does is delay it. Eventually, the last co-owner will die, and the estate will pass into probate anyway.
2. Misplacing Trust
Bank accounts are among the most common types of property that people may own jointly. However, owning a checking or savings account jointly gives every co-owner equal access to the funds. All it would take would be one dishonest account holder to withdraw all the money and disappear, and all the other owners would be down and out. The bank would not be able to do anything about it, and there would be no legal recourse to hold the bank responsible. The law extends protection to financial institutions in situations like that.
3. Dealing With Tax Problems
Joint ownership of stocks or real estate can lead to all sorts of tax headaches related to capital gains, gifting, etc. This is especially true when it comes to real estate.
4. Identifying Owners
Depending on the laws in your state, joint ownership rights can sometimes extend beyond named owners to their spouses. If this is the case, it will be impossible for surviving owners to sell the property (if desired) unless all those with an interest in the property, including spouses of owners, agree.
5. Becoming Incapacitated
Although jointly owned assets automatically go to the others upon one owner’s death, sometimes a co-owner becomes incapacitated. This creates a difficult situation in which ownership rights do not transfer because the person is not dead, but the individual is unable to act in his or her own interest. The solution is for a court to appoint a conservator to act on the behalf of the incapacitated joint owner.
There are many good ways to avoid probate, but joint ownership of property usually isn’t one of them. Contact an estate planning law firm in O’Fallon, Missouri today, and an attorney can explain better options to you.
Call the Legacy Law Center for their insight into estate planning and joint ownership.