Understanding the Risks of Joint Tenancy in Estate Planning

If you are considering transferring real property (such as your house or farmland) or personal property (such as a bank account) into joint tenancy with your spouse, adult child, or any other person, as part of your estate plan it is important to be aware that there may be significant problems that result from placing property in joint tenancy.  It is also important to consider the possibility that your current desires for the ownership of your property may change in the future. However, once property is jointly owned, it may prove to be very difficult, if not impossible, to change.

To help avoid any difficulties that may arise from the transfer of property into joint ownership, it is imperative that you clearly document in a written record your intentions for the transfer.  Is your intention to give an immediate gift of the property to the transferee? Or, is your intention to maintain your property rights during your lifetime, with the associated intention that only upon your death is the transferee to become the owner of the property?  Alternatively, is your intention only to avoid probate fees, with the associated intention that the transferee will share the value of the property with other specific people after you pass away? 

It is important to note that when property is transferred to a joint tenancy, the property may be vulnerable to claims of the transferee’s creditors, and may form the subject of dispute in the event of a marital breakdown of the transferee and their spouse.

In the event that the true ownership of the jointly owned property becomes the subject of a legal dispute after your death, your documented intentions at the time of the transfer will be vital evidence for the court to consider when making its determination.  Without evidence of your intention for the transfer, the presumption of resulting trust may govern any adversarial outcome.  This means, if the transferee cannot satisfy the court that the transfer to joint tenancy was intended as a gift, the likely outcome is that the transferee will be determined to be holding the property in a resulting trust for your estate, to be distributed to your estate beneficiaries.

In order to be aware of, and avoid, the pitfalls involved in gratuitously transferring property into joint ownership, it is a wise investment to seek legal advice to specifically consider your unique circumstances and prepare a well-thought-out estate plan.