Why Joint Ownership Can Put Your Children’s Inheritance at Risk
Owning your home or financial accounts jointly with someone—such as a spouse or adult child—is common. However, the way you hold title can have serious, unintended consequences for your estate plan and your children’s inheritance. The most frequent form is joint tenants with right of survivorship, which means that when one owner passes away, the surviving owner automatically becomes the sole owner, regardless of what your will or trust says.
How Joint Ownership Affects Probate
Many believe joint ownership avoids probate entirely. In reality, it only postpones probate until the last surviving owner dies. If no new joint owner or beneficiary is named, or the property isn’t placed in a trust, probate will be required for the remaining owner’s estate. If all joint owners die simultaneously, probate may be needed immediately.
The Risk of Unintentional Disinheritance
Joint ownership with survivorship rights can override your estate plan. Here are two common scenarios:
- Spouse as Joint Owner: If your spouse is not the parent of all your children, they will automatically inherit the property and can leave it to whomever they choose. Your children may be left out entirely.
- One Child as Joint Owner: If you add one child as a joint owner, that child inherits the entire property, leaving siblings with nothing. There is no legal obligation for them to share.
Example:
Robert inherited his family’s vacation home and added his wife, Joan, as a joint owner. After Robert’s death, Joan became the sole owner. She remarried and added her new spouse to the title. When Joan died, her children discovered the property now belonged to her new husband, not them—contrary to Robert’s intentions.
Other Risks of Joint Ownership
- Difficulty Removing Owners: All co-owners must agree to changes. If one refuses, you may need to go to court.
- Exposure to Co-Owner’s Debts: If your co-owner is sued, your property could be at risk.
- Gift Tax Consequences: Adding an owner may be considered a gift, with possible tax implications.
- Co-Owner Incapacity: If a co-owner becomes incapacitated and lacks a financial power of attorney, you may need court intervention for property decisions.
How to Protect Your Children’s Inheritance
- Review Ownership Structure: Regularly review how your property and accounts are titled.
- Consult an Estate Planning Attorney: Professional guidance ensures your estate plan works as intended.
- Consider Alternatives: Trusts, beneficiary designations, and other planning tools can help avoid these risks.
Next Steps
Don’t leave your family’s future to chance. Schedule a review of your property ownership with Rincker Law to ensure your estate plan protects your loved ones. Joint ownership may seem simple, but it can put your assets and your children’s inheritance at risk. Call Rincker Law PLLC at (217) 774-1373 to schedule a consultation, these problems are preventable with the right planning.