One of the most common types of joint ownership is joint ownership with right of survivorship (JTWROS). When one joint co-owner dies, his or her interest passes automatically to the surviving joint owners, rather than to the decedent’s heirs. JTWROS is commonly found on bank accounts and real estate.
JTWROS does not avoid probate; it simply postpones it until the death of all joint owners. After all joint owners die, then the asset will pass through the probate court and be distributed. For example, if a married couple are joint owners on their home, it will not pass through probate court until the death of the surviving spouse.
While JTWROS can be an easy way to simplify the distribution of assets, it also can have many unforeseen consequences. While it is fairly easy to add a joint owner, removing a co-owner can be difficult. For example, if a mother adds her daughter as joint owner on her home, then changes her mind, she cannot remove her daughter as co-owner without her daughter’s permission. While the daughter’s name is on the home (or bank account), she has equal access to the property. If the daughter files for bankruptcy, is sued for injuries she caused someone or gets divorced, the jointly owned property could be at risk.
There are a few other downfalls of joint ownership. The first is that a will only controls the distribution of assets that are in the sole name of the deceased; it does not control who gets the jointly owned assets. Also, if people do not die in the order anticipated, such as a son dying before the father, the asset will not go to the son’s children but through the probate court after father’s death.
Without careful consideration and planning, joint ownership could cause disastrous unplanned consequences. It is important to discuss joint ownership with a qualified elder law attorney to avoid unintended consequences and make a decision that is best for your specific situation.