What is Joint tenancy?
In a joint tenancy ownership, at least two people own a common property with both having equal rights to the property. For example, you could own your house jointly with your spouse. Both of you have 50/50 ownership of the house as joint tenants. You cannot sell or bequeath the property or any part of it without your partner’s consent.
And the distinctive characteristic of a joint tenancy ownership is that there are rights of survivorship, that is, the surviving owner has full rights to claim the property fully when the other partner dies.
Hence, joint tenancy helps in avoiding probate by the fact that the surviving owner has full legal claim over the property.
No probate would be required for such property since the rightful inheritor is already legally acknowledged.
Things to understand about joint tenancy and the probate process
Because of how complex and expensive probate typically is, many people look for ways to avoid or minimize it. One of the ways to accomplish that is by holding property by joint tenancy. But if you are doing that, then it is crucial you have proper understanding of what you are going into.
Account may get frozen
It is worthy to mention that not only real property can be owned by joint tenancy. Even a bank account can be jointly owned.
Now the problem is this. The surviving partner may have been in debt before passing away. The creditors surely will come knocking, and the court has a legal right to freeze the bank account. There is a greater chance for this to happen if the court believes that the surviving partner made no significant contribution to the property, or that they may liquidate in a deliberate attempt to avoid settling the deceased owner’s debts.
However, the surviving owner can avoid a frozen account by acting in good faith.
The surviving partner has complete control over the property
One notable thing with joint tenancy ownership is that the deceased partner cannot dictate what happens to the property when they pass away. The completely forfeit their 50% ownership of the property to the surviving partner. The latter therefore has full legal right to sell or bequeath it to someone else. If it is a husband and wife, as is often the case with jointly held homes, then there is possibility that the surviving spouse will remarry. In the end, the house, business, or whatever legacy may end up in another family.
Other ways to avoid probate
If the joint tenancy does not appeal to you, there are other ways by which you can avoid probate while enjoying more benefits.
Also, you can use a number of methods in addition to joint tenancy so that you can enjoy maximum benefits.
The common ways to avoid probate includes:
- Executing a living trust
A living trust is a form of legal agreement in which you transfer asset(s) into an abstract entity (the trust). Transferring assets into a trust is known as funding the trust. The trust becomes the owner of the asset, and there must be a beneficiary. There must also be a trustee to manage the trust on behalf of the beneficiary. By naming yourself as the trustee, you can use the trust assets until you pass away, after which your successor trustee will then manage/transfer the assets to the beneficiary. The transfer takes place immediately and outside probate.
In a trust you can leave instructions just as a will about how the assets are to be used or disposed.
- Annual Giftings
You can also make giftings up to $15,000 a year without incurring any tax. Here, you don’t have to wait for death before Transferring funds to your loved ones. You transfer amounts yearly to them until the amount left in your estate will be minimal, thus minimizing probate.
Get help from an estate planning lawyer near you
An estate planning attorney can always help you plan towards easy, cost-effective, and efficient asset transfer. To ensure your loved ones receive the most out of your estate, consult an experienced estate planning attorney near you.