A woman called me to discuss her estate planning needs. Her major asset was a multi-million dollar house on the beach. I recommended a trust and my reasons why.
The beach house owner argued the best and almost no-cost way to plan her estate was to put her daughter on title in joint tenancy. It was the way her mother transferred the house to her and it was the way she was going to give the house to her daughter when she died. This beach house was a legacy to be passed down from mother to daughter for generations to come through joint tenancy. Her decision had been made even before we met. Begs the question why she wanted to meet in the first place.
I should explain what is “Joint tenancy”? Joint tenancy is when two or more people own an asset and they agree to own the property as joint tenants. Your state has a law that when a joint tenant owner dies his or her ownership disappears. The survivor is automatically the sole owner.
I understand the allure of joint tenancy as a low-cost approach to estate planning. For the price of a transfer deed the owner places another person on title and the estate plan is done without incurring attorney fees.
For joint tenancy to work, you need a surviving owner. I asked the beach house owner, what if she is the survivor? Her reply was to just add someone else. But will this work? Will the survivor know what to do? Will he or she have capacity? Will the survivor take action before he or she dies? If the answer is no to any of the questions the property will have to be transferred through the probate court. In joint tenancy you delay incurring costs, but you do not avoid them. You kick costs out into the future and those costs will be more.