By Keith L. Davis, Esq.

Occasionally, clients ask about placing assets in joint tenancy with the right of survivorship (JTWROS) as means to allow loved ones to assist in managing assets during disability or as an estate planning device – more particularly to avoid the probate process.  Often using JTWROS is a mistake.

When planning to manage an account during disability, it is usually preferable to: 1) add an account signor (but not co-owner), 2) use a financial power of attorney, or 3) use a revocable trust.  Often when a co-joint tenant is added, the parent names one child with the parent’s assets being left equally by will or trust to all of the children.  Since the joint tenancy overrides the will or trust, a different distribution than intended occurs and hard feelings among beneficiaries often result.

If the property being considered for JTWROS has appreciated since its acquisition, the Transferee may suffer higher taxes upon future sale of the property.  This is because, upon transfer of the one-half interest by gift, the Transferee receives one-half of the Transferor’s lower cost basis rather than one-half of the higher appreciated value.  Whereas, if the property interest were transferred at death, the Transferee would receive a higher “stepped up” basis thus allowing him or her to sell the property in the future at less gain for tax purposes.

Two additional concerns with gift transfers involve creditors and “predators” and government benefits.  Should you transfer a property interest to your child, your property may be subject to creditor’s claims against your child including claims by their divorcing spouses (“predators”).  Additionally, transfers by gift may subject you to loss of needs-based government benefits.

For these and other reasons, competent counsel should be consulted prior to transferring property to joint ownership.  Our attorneys are available to assist in analyzing the best course of action.