The Dangers of Jointly Owning Property

Joint ownership of property, even within your family, can create legal problems.

Consider – and remember – this story about Karl. He went to a hospital for open heart surgery. Karl decided to put his Florida condo into the names of his four grandchildren. He thought this was a good way to avoid income and probate taxes.

Karl did survive his surgery. However, when he visited a lawyer to update his will, he got a surprise. Here are the six dangers, all starting with the letter “D”, that Karl’s lawyer told him about.

This is a valuable lesson for you as well. Review this list before you consider holding property in joint ownership with anyone, including your children.

The Six Dangerous “D” Words

1. Disaster

Joint owners can refuse to cooperate when you need to deal with the property. There is no law that says Karl’s family has to do exactly as he says.

2. Death

Your child could die first, or at the same time as you, which means you must plan for other contingencies.

3. Divorce

Divorced spouses of a child can make a claim to the property, forcing the estate to sell.

4. Debts

Creditors of bankrupt children can make claims against property.

5. Disposition

Transfers of some assets can be expensive. Karl created a taxable capital gain when he transferred the condo even though he got nothing in return. That made him liable to pay income taxes.

6. Dumb

Judges may have to decide if your intention, when creating the joint asset, was to make a gift or avoid probate.

Your estate family planning decisions should not force your family to go to court to prove a gift was intended. Why create problems when you can prevent them?

Risky Business

Always discuss with your lawyer the advantages and disadvantages of having jointly owned assets. Consider the risks and tax consequences carefully before you give up control of your assets.

Once someone is a joint owner, you are stuck. There is no law that lets you remove a joint owner without that person’s consent.

Even if anyone gives up rights to property, the will still needs independent legal advice. That advice can be costly and prevent you from getting what you want.

Remember, you can’t give away jointly owned property by your will unless the other joint owner dies first. You cover these assets in your will only in case the other joint owner dies first.