Why Joint Ownership Should Not Be the Go-To Plan for Newlyweds

If you recently married or have been married for a while and have acquired additional money or
property (or plan to), you have options regarding how your assets can be owned. Although joint
ownership seems easy and convenient, it may not always work as well as you think it should,
depending on the circumstances.

What Is Joint Ownership?
After getting married, some couples may choose to add each other to their existing bank
accounts, brokerage accounts, and real estate (collectively called assets) as joint tenants with
rights of survivorship (JTWROS). An asset owned as JTWROS is owned by at least two people,
with each person having an equal right to the account or property. When one owner dies, the
remaining owners automatically receive the deceased owner’s share. Going to probate court is
not required for this transfer; it happens after a death certificate has been furnished to the
appropriate party or recorded. For example, if a married couple owns a bank account as
JTWROS and one spouse dies, the surviving spouse automatically becomes the sole owner of
the account once the appropriate documentation has been provided. Although this scenario may
seem like an easy solution to owning your assets and avoiding probate, there can be some
pitfalls.

Issues with Joint Ownership
When two people jointly own an asset, problems can arise, especially when a relationship is
unstable, because neither person can unilaterally sell, lease, gift, or encumber (which includes
refinancing a loan, among other things) the property without the other person’s consent or,
possibly, without judicial intervention. Depending on state law, there may also be additional
concerns when dealing with bank accounts; since both people usually have unrestricted access
to the account, either person could potentially go to the bank and drain the account without the
other’s consent.

There are also issues with attempting to use JTWROS to avoid probate. When one spouse
passes, the surviving spouse assumes sole control over the asset and can use or gift the asset
during their life or gift it upon their death in any way they desire and may choose not to follow
the deceased spouse’s wishes. This result is particularly risky when it comes to inherited or
separate (nonmarital) property, such as a farm or ranch, that has been passed down through
generations in the deceased’s spouse’s family. The deceased spouse may want the asset to be
gifted to their own descendants after the survivor passes away, but the survivor can and may
redirect the asset to someone else.

In a blended family, JTWROS may lead to the unintended consequence of a client disinheriting
their children from a prior relationship. If everything is owned jointly by the couple, then when
the first spouse dies, their children from a prior relationship will have no right to the jointly owned
accounts and property because ownership automatically goes to the surviving spouse under the
survivorship rights.A comprehensive estate plan that uses a trust to hold your assets can better control and protect
such items. Whether due to creditor issues, incapacity, or death, the right estate plan will ensure
that you and your spouse will be able to continue enjoying your assets as intended while
minimizing potential taxes and court costs.

Bottom Line
For all these reasons, it is important to consult with an estate planning professional to
understand your options regarding the best approach to owning your assets. If you recently got
married or are acquiring additional assets with your spouse, contact us right away to learn about
your options.