November 22, 2010
As a wills lawyer in Sacramento, I’m often asked by well meaning people whether they really need a will if all of their property (house, cars, etc) is jointly owned in the state of California.
From an estate planning perspective, this is a great question and my straightforward answer to it is yes and no.
Yes, it is true that if you own an asset jointly with rights of survivorship in California, the surviving tenant will automatically get the property when you pass—no questions asked. The passing of the asset will even avoid probate until the surviving owner of the property dies (note: joint ownership does not stop the probate process, it simply delays it). But in general, there is no need for a will or other estate planning documents to specify what you want done with such an asset.
Yet here’s where things get complicated. What if both owners die at the same time? This is not unreasonable to assume, especially in the case of married persons, couples or close relatives that spend a lot of time with each other. In this case, you would need a will to specify who gets the property if both you and the joint tenant pass away simultaneously. Otherwise a judge who doesn’t know you or your family will be forced to follow the Probate Code and make this decision on your behalf.
Or let’s say in the case of a married couple, one owner dies (we’ll call her Mary) and the asset passes to joint tenant/ spouse, John, as intended. In this scenario we’ll also say Mary and John have 3 children who expect to inherit the property once John dies. Then John falls in love and he puts his new wife Sally as joint tenant on the home (at Sally’s urging of course) when they get married. When John dies, Sally gets the property free and clear and the children of John and Mary are left with nothing.
Besides the numerous other tax and estate planning problems that can occur after the passing of a joint tenant, joint tenancy can also set you up for a number of other unsuspecting headaches down the road.
For example, what if you add someone as a joint tenant and later change your mind? Most people don’t realize that it’s VERY difficult to remove someone’s name from the title at this point. Not to mention, if your joint tenant is sued or goes through a divorce, the asset you share with him or her is on the line. This is not a smart position to be in—especially when it affects the place that you live!
It is important to note that our discussion so far has focused on one form of joint ownership – joint tenancy – but there is another form – tenants in common – that works in a completely different manner. Tenants in common ownership does not provide for a right of survivorship. When the tenant in common dies ownership of that person’s share will not pass automatically to the remaining owners, instead that share will be treated the same as any other asset with a just one person’s name on it. In other words, the only way to pass on the ownership will be through Probate!
So instead of relying on joint ownership to avoid probate or pass your assets free and clear to your spouse or other desired heir, I would advise you to sit down with a Sacramento will lawyer to find out exactly how joint tenancy would affect your family when you pass. The decision may have consequences you never intended and may ultimately disinherit your loved ones or cause major legal problems down the road.