While my firm does plenty of estate planning, my role in the firm is to handle the “litigated cases.” This means that I step in when things have gone wrong – sometimes horribly wrong – after someone passes away. Over the past few years I’ve noticed that one of my favorite estate planning tools, the use of joint tenancy with rights of survivorship, has also become an area leading to litigation and unwanted outcomes. In an earlier post, we discussed joint ownership with spouses but here is a review of this form of ownership.
Joint Tenancy with Rights of Survivorship can apply to deeds on real property, bank accounts, car titles, and other assets. This form of ownership allows two parties to hold the asset in such a manner that when the first one passes away, the remaining owner holds 100% of the asset. In our prior example of a marital home, the deed to the home would contain certain language to create a “joint tenancy with a right of survivorship” or JTROS. In this form of ownership, if the Husband dies first, his 50% passes immediately to the remaining owner (i.e., the “survivor” of the tenants takes it all), and it does so without passing through an estate, going through probate, or anything else. It’s “automatic.” There are certain circumstances beyond the scope of this post where this doesn’t work (more than 2 owners, one joint tenant kills the other, etc.), but for the majority of situations, it’s a great tool for spouses.
So, you might be wondering why this area of the law leads to so much litigation. The reason is that our example shows how joint tenancy with right of survivorship works – and works well – with spouses. The area in which this is frequently litigated involves children. My litigated cases would decline if everyone followed one basic rule: You should not title property (this includes bank accounts, homes, vacation houses, CDs, vehicles, etc.) jointly with your child unless you are fully intending to gift that ownership to them and them alone. Here is the most common example of this disaster:
Husband and Wife were married for 30+ years and had three children; we will call them O (oldest), M (middle or mooch), and Y (youngest). Husband passes away with the marital home, a bank account, and a car held jointly with right of survivorship with Wife. Wife is so impressed that this didn’t have to go through probate that she decides to tell her middle child, M, that she is going to title these same assets with him since he lives close by and helps her manage her affairs. He agrees. She then has him promise that when she passes everything will be divided equally between O,M, and Y. To be safe, she also updates her will leaving all of her assets to be divided equally between the three children and names O as the Personal Representative.
Years later, Wife passes away. O, the Personal Representative in the will, quickly learns that most of the assets were titled jointly with rights of survivorship with M and therefore passed directly to him at death. M did not need court approval because he was the joint holder of these assets, although by all accounts he never contributed towards paying for any of them. By the time O consults an attorney, M has already taken all funds from the bank account, sold the car, and moved in to the once marital home.
O has options – but they are all costly, lead to serious animosity between the siblings, and involve lawyers, witnesses, hearsay issues, and more. And, unfortunately, O and Y will likely lose in court. The will in this situation does not add the layer of protection sought because a will does not control assets that pass outside of probate. In the end, unless you have an only child (those lucky kids), what worked great between Husband and Wife leads to unintended consequences when it comes to kids.
Joint ownership of property leads to a myriad of questions in the estate planning context. To make sure you’re putting the pieces of this puzzle together correctly, it’s always wise to get legal consultation before changing your deeds or updating your will.
March 27, 2016 at 7:09 PM
Grand Parents Estate..Probated Her estate (Died 2 years ago) in final stages of closing in a few weeks.. Deed of distribution of 2 pieces of property filed (I am the Sole heir and Personal Rep) Grandfather died just over 10 years ago…his will is the same as hers but was not probated…property is Joint Tenancy….What can I do now.. ??
Emilio Correa says:
November 28, 2016 at 5:59 AM
I have joint tenancy with the rights of Survivorship, with my wife and daughter. My daughter lives in the house and my wife and I live in another house. Is my daughter entitled to claim the 4% legal residence discount? Is it correct that if she owns 25% or more of the property she can claim it? She owns 33% of the property
Tiffany Provence says:
November 30, 2016 at 10:23 AM
For the purposes of this reply, I am going to assume that you are claiming the 4% on the other home. If that’s the case, then your daughter may apply and otherwise qualify with the assessor to receive the 4% on this home (again, assuming she isn’t claiming 4% on another home). South Carolina Code 12-43-220(c)(8) addresses this issue.