The origins of Joint Tenancy, the most common form of ownership of real property for co-owners (usually married couples), date back to 16th Century England. The primary reason for its continued popularity is its simplicity. The right of survivorship that is at its core renders the transfer of property between co-owners when one dies essentially automatic. In other words, if two co-owners hold title as Joint Tenants, when the first one dies, the property simply becomes the sole property of the survivor.

This simplicity has effectively made Joint Tenancy the “default” form of ownership for co-owners. And this form of ownership is not limited to real property – if, for example, two people have a joint bank account, that account’s legal form of ownership is Joint Tenancy.

Fun Fact – if you see the term “Joint Tenancy With Right of Survivorship,” (not uncommon) the inherent right of survivorship that defines Joint Tenancy renders that phrase redundant and repetitive.

So, all good, right? Maybe not so much. 

The problems with Joint Tenancy start to accumulate when one examines Joint Tenancy in the context of Probate. Obviously, when the first of two Joint Tenants dies, the right of survivorship ensures that the asset flows to the surviving Joint Tenant free of probate. But what happens when the resulting sole owner dies? Probate happens. 

Even if that surviving Joint Tenant had a will that states their intention as to who they want to inherit the asset, the asset would have to be the subject of a probate proceeding. Therefore, Joint Tenancy does not avoid probate, but merely puts it off. And the very nature of the right of survivorship that makes the transition so smooth from two Joint Tenants to one after the death of the first has the effect of lulling folks to sleep: “Gee, that was easy when Dad died, everything just flowed to Mom, therefore it’ll be easy when Mom dies, it’ll all flow to us, right?” Wrong.

And it can get worse. Of all the bad advice out there, for some reason this piece gets followed more than most. Often that surviving Joint Tenant will try to “beat the probate system” by adding another person to title as a Joint Tenant (most commonly, the surviving spouse will add one of the children to title as a Joint Tenant) so that the “string” of Joint Tenants is extended, thus avoiding probate. Then, the expectation is, that after the death of the second parent, that one child who was the surviving Joint Tenant will “do the right thing” and divide the property among all the children.  Maybe . . . but there is no legal obligation for that to happen and, in many cases, that child will turn to his or her siblings and say something to the effect of “Well, I guess Mom and Dad must’ve like me best”, and there would be nothing the siblings could do about it – even if the parent’s will declared that it was to be divided equally. That is due to the fact that form of title trumps everything!

And, even if that sibling wanted to “do the right thing,” he or she would face gift tax implications if they shared with the brothers and sisters (since they’re at that point giving away what is legally theirs).

Well, you’re thinking, why not simply add all the kids as Joint Tenants to eliminate the possibility of one child not sharing with the siblings? Because by eliminating that one problem that parent would be exposing themselves to a whole host of potentially devastating outcomes. Keep in mind that multiple Joint Tenants own what is known as a 100% undivided interest in the asset while living – that means that if one of the Joint Tenants has a problem such as a divorce, a car wreck, bankruptcy, outstanding child support obligations, etc., the creditor can take the entire property – not just a fractional share!

Consequently, if someone tells you that you can defeat probate on your home by adding your kid or kids to title with you as Joint Tenant(s), DO NOT BELIEVE THEM – you are getting bad advice.
And, to complete the panoply of reasons why Joint Tenancy is far from optimal (despite the irony of it being the default form of ownership for couples), it leads to a vastly inferior tax treatment than that available via alternative forms of ownership – the ultimate, of course, being ownership vested in a Living Trust.

If you have any questions or would like more information, please don't hesitate to call (877-585-1558), email us or register to one of our free webinars.
 
By Paul Morison

Photo Credit: Nani Chavez

In light of the recent Covid 19 Healthcare Crisis that, worldwide, has claimed over 237,000 lives, it is important to ensure that your medical wishes are well-known and documented. The best practice to do so is to prepare a California Law compliant Advance Healthcare Directive, sometimes referred to as a Durable Power of Attorney for Health Care or a Living Will. An Advance Healthcare Directive will ensure that if you cannot give informed consent or denial any longer, that your medical wishes are adhered to up to and including the final moments of your life. It allows you to appoint an healthcare agent to act on your behalf and avoids the need to establish an expensive probate proceeding known as a Conservatorship.

‏However, after cases such as Terri Schiavo (nee Schindler) in Pinellas Park, Florida, resulting in over 14 appeals to both the Florida Supreme Court and the Supreme Court of the United States, it is imperative to have an advance healthcare directive in place that clarifies your wishes and beliefs on end of life treatment options. Schiavo's husband and parents were in a legal battle regarding her feelings on the Right To Die law, also known as the Death With Dignity law. After 13 days of surviving without a feeding tube, Terri Schiavo succumbed to dehydration after living in a vegetative state for over 15 years in a Pinellas Park hospice center. ‏
 
How Do You Find An Advance Directive Form?‏
 
You can download a generic one from the California Medical Association for a modest fee. Better yet, you can have a fully customized Advance Directive prepared by an attorney at our firm, also for a modest fee.
 
The advance healthcare directive form can be especially vital in cases of cognitive diseases, such as Alzheimer's disease, in which you lose cognitive abilities as the disease progresses. In addition to making healthcare decisions about day to day medical care, DNR and DNI orders can be obtained and put into effect. A DNR (do not resuscitate) and DNI (do not intubate) order can ensure that you aren’t left in a vegetative state for an indeterminate period of time, and that your end of life treatment decisions are adhered to, even if you are incapacitated. ‏
 
‏Once you have your advance healthcare directive completed, and if necessary, witnessed and notarized, you should provide a copy to both your primary care physician and your healthcare proxy. This is to ensure that there is more than one person with your end of life treatment options working to ensure that your wishes are met. In the case of Terri Schiavo, it is important to note that there was no advance healthcare directive in place.

If you have any questions or would like more information, please don't hesitate to call (877-585-1558), email us or register to one of our free webinars.

By Christopher E. Botti

(Photo credit: Piron Guillaume)