If your jointly owned property has caused you to loudly exclaim, “OH NO,” you haven’t owned it long enough yet. But isn’t that they way most people, at least married couples, own their property? Yes, it is. But look what happens. And then you decide whether you want to own property jointly.
Jointly owned property – Catastrophe #1
Fred and Wilma own most of their assets jointly: house, bank accounts, and investment accounts.
Wilma now owns everything in her individual name.
If Wilma is sued because she committed malpractice, caused a car accident, goes bankrupt, has a business failure, gets divorced, etc…..
All of the assets can be taken because they were inherited without any asset protection. Joint ownership has a survivorship feature that causes the property to go outright to the surviving owner.
Jointly owned property – Catastrophe #2
Wilma hasn’t been sued (yet) but she gets remarried to Barney. She always thought he was cute. Blondes are more fun afterall.
Wilma and Barney put all of their assets in joint names because that’s what married couples do.
Barney, by operation of law, automatically inherits all of the jointly owned property.
When Barney dies, where do Fred and Wilma’s assets go?
What does Pebbles get? Nothing.
Many children are unintentionally disinherited by jointly owned property.
Jointly owned property – Catastrophe #3
Disinheritance also occurs unintentionally when siblings own a hunting cabin or family vacation home together.
The survivor takes all and the family of the first to die has no legal interest or right to the property. The kicker is that the decedent’s family has to pay the taxes on the transfer of the family vacation home to the sibling but has no benefit of the asset.
Jointly owned property – Catastrophe #4
Some parents, especially elderly and recently widowed parents, put a child’s name on the house or other assets. (Don’t ever do this.)
We’ll use the example of Jake the Snake and his mom.
Momma Snake puts Jake’s name on her house and bank account. He’s the oldest.
What happens when Jake the Snake:
- Gets divorced?
- Goes bankrupt?
- Needs to qualify for Medical Assistance?
- Is sued for causing a car accident?
- Has a medical crisis?
- Is a jerk?
- Needs money?
- Commits malpractice?
You’re right. Momma Snake likely loses her house and her bank account.
What happens when Momma Snake dies?
Jake, by operation of law, inherits the assets. His siblings, Momma Snake’s other children, inherit none of the jointly owned property.
If you have questions about the big “OH NO” of jointly owned property, consult with a qualified estate planning attorney.
Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.