Some people, in an effort to avoid probate, choose to add their children to the title of their property, such as real estate or vehicles. This can work in some situations, but depending on the circumstances, it may cause more problems than its worth. Understanding the different types of property ownership, as well as the consequences, will allow you to make a better decision about which type of ownership will accomplish your goals in estate planning.
Types of Ownership in Real Estate
The term “joint tenancy” is used to describe the situation where two or more people have a common ownership interest in the same real estate. All joint owners have the same rights to the property, as well as the same obligations, while they are living. As joint tenants are considered owners of the property, they all have to consent to the sale or mortgage of that real estate.
When one of the joint owners dies, the surviving owners will automatically inherit the property interest of the deceased owner. Property that is held in joint tenancy is not required to go through probate proceedings when a joint owner dies. The title belonging to the deceased is simply transferred by executing and recording an “affidavit of survivorship.”
Joint Tenancy in Los Angeles: Issues to Consider
Joint tenancy results in multiple decision makers.
If you choose to include your child as a joint tenant, for example, of your home, you no longer own that property alone. That means, you no longer have the sole right or authority to make decisions about the home. If you decide to sell or mortgage the home, you must now obtain the consent of your child before you can do so. All owners of property owned in joint tenancy are required to sign any mortgage or deed for the property. Your child would also be entitled to weigh in on decisions to repair the home or make improvements.
Your child would also become equally obligated to pay for expenses relating to the property. When there are multiple owners and decision makers, they may not always agree on the repairs that need to be made or whether the cost for those expenses is reasonable. These are all issues that should be considered before deciding to add a joint tenant.
No control over the joint tenant’s share.
Just as the joint tenant has a right to make decisions about the property as a whole, he or she also has the right to sell or transfer their own interest in the property at any time, to anyone they choose. For instance, if your child begins experiencing financial difficulty, he or she may sell his share of the property to pay debts. More importantly, problems will arise if a joint tenant files bankruptcy and the property is not that tenant’s homestead. The property would not be exempt from the joint tenant’s creditors. This situation would have a significant impact on the ownership rights of the other joint tenants.
In light of some of the consequences of joint tenancy ownership, it is a good idea to discuss alternative estate planning tools with an estate planning attorney. An attorney can discuss various options and determine the estate planning tools that are best for your specific situation.