Joint ownership of real estate can be a great way to share ownership and responsibilities with family members, friends or business partners. However, when it comes to estate planning, joint ownership can create complexities that may lead to unintended consequences. You may unintentionally disinherit your loved ones or create unnecessary legal battles.
Understanding joint tenancy
Joint tenancy is a type of co-ownership where two or more individuals own a property together. When one owner passes away, their share of the property automatically transfers to the remaining owners. This can be a convenient way to avoid probate, but it is essential to consider the potential drawbacks.
The risks of joint tenancy
One major risk of joint tenancy is that it can create a “right of survivorship,” which means that the remaining owners may inherit the entire property, regardless of the deceased owner’s wishes. This can lead to disputes, especially if you have different goals or priorities.
Additionally, joint tenancy can create tax implications. You may be subject to capital gains tax on the entire property, even though you only own a part of it.
Tenancy in common: A more flexible option
Tenancy in common, on the other hand, allows you to own a percentage of the property, which you can transfer to your heirs upon death. This type of ownership provides more flexibility and control over the distribution of assets.
Estate planning considerations
When it comes to estate planning, it is essential to understand the complexities of joint ownership and its potential implications. If you are a co-owner of real estate, it is crucial to seek legal advice from an attorney who can help you make informed decisions about your property. By getting legal guidance, you can avoid potential pitfalls and achieve your estate planning goals.