Fratello & Fox, P.C.

516.496.0730

ATTORNEYS AT LAW

             A number of assets are commonly held jointly, such as homes and bank accounts.  While jointly owned property may be useful in some situations, many people are unaware of the potential pitfalls of holding assets jointly.  In fact, joint assets are a frequent source of litigation.

             Joint tenancy of an asset arises when there is co-ownership of an asset among two or more persons.  Joint assets are typically held in three different forms: (1) tenancy in common; (2) joint tenancy with rights of survivorship; and (3) tenancy by the entirety.

             Tenants in common hold a proportionate undivided interest in the subject property.  That portion of the property can be unilaterally sold, transferred, gifted or transferred by will.  

             A joint tenancy with rights of survivorship is similar to a tenancy in common, however, a co-owner decedent’s share of the property will pass to the surviving joint tenant(s) and not through the decedent’s will or by intestacy (when the decedent does not have a will). 

             A tenancy by the entirety arises presumptively when a husband and wife obtain assets jointly.  A tenancy by the entirety also has rights of survivorship, but affords tenants additional protections such as limiting the ability of one spouse to sever the co-ownership and some creditor protection.

             Be aware that a joint owner has the ability to exercise ownership rights.  A joint owner may have the ability to withdraw up to 100% of an account’s funds.  He or she may also be able sell their interest without the consent of the other joint owner(s) (this is not so with a tenancy by the entirety).

             Joint ownership may result in an unintended lifetime gift and/or the accidental distribution of assets to an unplanned beneficiary.

             Creditors may have the opportunity to not only reach the share of a debtor joint owner, but may attempt to reach the non-debtor co-tenant’s portion as well.

             Older adults often benefit from a reduction in real estate taxes because of their age.  Adding another person to the deed who is under the age of eligibility for the tax reduction may disqualify the older adult from receiving the reduction in property taxes. 

             In the context of Medicaid planning, the establishment of joint ownership in an asset may constitute an uncompensated transfer which can affect Medicaid eligibility.

             It is important to speak to an attorney to determine how your assets are presently held.  If an asset is held unfavorably, it is best to make a correction as soon as possible.   

 

Dated: 6/5/2006

 

Pitfalls of joint ownership

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