Estate Planning Should Include Careful Consideration of Joint Ownership of Assets
Virginia Beach, VA (Law Firm Newswire) December 28, 2015 – There are a number of reasons for jointly owning assets, such as a home, land, vehicles and financial accounts.
People who are older frequently enter into joint ownership of assets in order to facilitate access by their adult children, other relatives or friends in the event that the older persons lose capacity. Another rationale for joint ownership of assets is the avoidance of probate as the assets pass to one owner upon the demise of the other.
Among the most typical jointly owned assets is a bank account, which is usually created with such language as “Joint Tenants With Right of Survivorship,” “JTWROS,” or by inserting “or” between names. This kind of account specifies that upon the death of the owner, the surviving owner inherits the asset.
“One must be aware of the consequences of joint ownership of assets so as to ensure that they pass to the intended heirs,” said Andrew H. Hook, a Virginia estate planning attorney with Hook Law Center, with offices in Virginia Beach and northern Suffolk. “A well-designed estate plan is drafted in such a way that the testator’s wishes will be properly carried out.”
While the correct use of JTWROS accounts can be advantageous, the improper use of such accounts can be detrimental. For instance, one must be aware of the fact that JTWROS accounts are transferred directly to the surviving owner, and not according to the will of the decedent. Thus, an individual may be unaware that his or her JTWROS assets would pass only to the surviving co-owner, even though the will states that the assets are to be evenly distributed to the children. A more desirable option may be to have the parent be the only owner of the asset, have the parent sign a power of attorney designating one child as the agent to assist with financial matters, and have the account be “payable on death” to each child.
Another disadvantage of joint accounts is that either owner of the account has the ability to make a withdrawal of all the funds in the account without the consent of the co-owner. Furthermore, if the joint owner is not a spouse, there could be gift-tax costs of adding another individual’s name to the account, and with joint title comes the risk of exposure of each co-owner to the other’s possible liabilities.
Married couples in about 20 states, including Virginia, may have the ability to utilize a certain type of joint ownership called tenancy by the entirety, which safeguards jointly held assets, including real estate. This kind of ownership may prevent creditors from reaching assets if they are not the couple’s joint creditors.