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Holding
Property as Joint Owners
(Or with Designated Beneficiaries)
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What is Joint Tenancy?
Joint ownership is where two or more people hold title to property together. Unlike some forms of joint ownership, when you hold assets as
"joint tenants with right of survivorship" the assets will pass automatically upon your death to the surviving joint
tenant(s). You may hold title to real estate, bank accounts, stocks and bonds and other assets as joint tenants. Joint tenancy can be a useful device in certain situations. However, the unrestricted use of joint tenancy can lead to adverse consequences.
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Does Joint Tenancy avoid probate?
Not really -- it usually just postpones it. Because assets held in joint tenancy will pass automatically by law to the surviving joint tenant, it will avoid probate on the death of the first joint owner. But if the surviving owner dies without adding a new joint tenant, or if both owners die at the same time, the asset must be probated before it can be transferred to the heirs. In such situations, joint tenancy merely acts to postpone probate.
What are the disadvantages of Joint Tenancy?
Extreme caution should be exercised before transferring assets to joint tenancy, particularly with someone other than a spouse. The following are just some of the disadvantages to using joint tenancy as a way to distribute your estate:
 Joint tenancy usually just postpones probate.
Joint tenancy may cause unintentional disinheriting.
If either joint owner becomes incapacitated, joint tenancy will not avoid the appointment of a guardian.
Joint tenants will have rights in the joint property immediately on creation. Adding a co-owner is easy, but if you decided you wanted to take a name off the title and the co-owner disagrees, you could end up in court. Similarly, litigation over joint bank accounts often occurs to determine whether the creator of the joint account wanted the survivor to be the sole owner of the property.
You expose all jointly held assets to the
co-owner's claims, debts and taxes such as if the co-owner is sued over an accident, is a party to a divorce proceeding, or has any other claims against him or her.
Even if assets bypass the probate process, they are still subject to gift taxes upon adding the joint tenant and upon death are still subject to estate and inheritance taxes.
Don't contracts and beneficiary designations avoid probate?
Yes-but only as to those assets. Other forms of property ownership that avoid probate include life insurance and retirement plans that are contractually payable to a designated beneficiary and accounts and securities designated to be transferred on death
(TOD) or payable on death (POD) to a named beneficiary. Payable-on-death accounts and securities and any assets that are contractually payable to beneficiaries such as life insurance, IRAs or pension benefits, will avoid probate of those particular assets, but probate will still be required for all other assets. Thus, probate is still required for all real estate, personal property and other assets a person owns even though some of their accounts designated POD or with designated beneficiaries will be not be subject to probate. Remember, however, that upon the death of the owner of accounts designated as POD or with designated beneficiaries proceedings may still be required to determine what federal, estate or Indiana Inheritance taxes are due on those accounts.
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