Problem No. 3 – Undermining the Estate Plan
Many people think of probate avoidance when they think of holding property jointly, but many forget that the joint holder will not have to abide by the terms of the rest of their Estate Plan when it comes to distributions. Jointly held property (with rights of survivorship) passes directly to the joint owner, and is not subject to the terms regarding distributions in the Will or Trust of the deceased owner. This can result in unintentional disinheritance of other children/loved ones.
The immediate assumption by some of my clients is that the child on the account or deed can just give the other children a portion after the parent dies (although this may not necessarily be a realistic outcome). Aside from the practical drawbacks of this kind of assumption-based planning, there may be unintended gift tax consequences imposed on the donor child in such a scenario.
Problem No. 4 – Loss of Control
In general, a joint owner cannot sell the entire property without consent from the other joint owners. While this may seem like an unlikely problem when the adult child has a close relationship with their parent(s), many people don’t want to have to ask their children if they can sell their house if they decide to move out.
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