Disadvantages of Joint Tenancy
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Home / Disadvantages of Joint ...When a person passes away, her assets are divided into two categories: probate assets and non-probate assets. Probate is the process through which a court or a government officer determines how to distribute a decedent's property based on the provisions of her last will. Non-probate assets are those that go directly to beneficiaries without going through probate.
One common type of non-probate assets are property that is held in joint tenancy. Many couples have joint bank accounts and jointly-held primary residence. No doubt joint accounts are convenient and simple to maintain. However, there are also disadvantages to hold property in joint tenancy. Below are some shortcomings of joint tenancy that one should consider before using it:
Loss of Control
The issue becomes more important when second or third marriages are involved. In the above example, if the person has children from his first marriage, and before he dies, he asked his wife to use the money from their jointly account to care for these children. However, after he dies, there is no guarantee that the spouse will follow his instructions after taking control of the money.
Changing ones property from solo ownership to joint tenancy may result in unintended gift taxes. This is because when a person "adds the name" of another person such as his child as joint tenant on his property, he is in effect making a gift of one-half the value of the property. Hence, a gift tax could have been resulted in this situation. There is an exception. Transfers to ones spouse who is a U.S. citizen is not subject to gift taxes.
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