Credit: Shutterstock photoT here are many reasons to own assets with others and many ways to hold them. But a titling mistake may harm you or your heirs. Many titling errors arise when assets are held as joint tenants with right of survivorship (JTWROS). The surviving co-owner or co-owners will inherit.
Often, JTWROS makes a lot of sense. But not always. Making the right choice can help your estate and retirement planning a lot.
Suppose a hypothetical Dave and Rose Peck are married. They hold investments, savings and real estate as JTWROS . If Dave dies first, Rose will own everything.
She'll have access to the assets right away. They won't go through probate , which can be expensive and time-consuming. And she can leave the assets to anyone.
Now let's look at a more complex scenario. Say that the Pecks are in a remarriage. They both have children from before.
If Dave and Rose hold everything as JTWROS, the survivor will own those assets after the first death. The decedent's children and any other intended heirs will be left out.
Often, elderly people want help managing their finances. Missteps can be damaging.
Say that Kim Long has a daughter Meg, who lives nearby, and another daughter Nina, who lives across the country.
Long, who is in failing health, would feel better if Meg could make sure her bills are paid and her investments are handled well. So Long adds Meg to her accounts. They're titled as JTWROS.
When Long dies, the assets will pass to Meg. Nina will be passed over, even though that wasn't Long's intent.
Potential Drawbacks
There can be other problems to JTWROS as well.
One owner's creditors may have access to jointly-held assets, and the surviving co-owner might not get a full basis step-up after an inheritance. That may increase tax on a future sale.
If JTWROS is not ideal, what options might work better? Long's faraway daughter Nina might suggest a "convenience account" for her mother's bank accounts.
Such accounts, available in many states, allow the account owner to add someone else's name for the owner's benefit. That will allow check-writing, bill-paying, withdrawals and so on.
Whether or not a convenience account is permitted, a durable power of attorney can also be useful. A power of attorney allows a named agent to act for someone else.
A power is "durable" if it will stay in effect even if its creator becomes incapacitated.
Here, a durable power would enable nearby Meg to act for her mother. But Meg would not become a co-owner, so Long's assets could pass to Meg, Nina and any other heirs.
Tenancy In Common
In other situations, jointly-owned property might be titled as tenancy in common (TIC). Then, each co-owner holds a share in the asset.
With TIC, the co-owners typically can sell, give away or bequeath their share. At death, the co-owner won't automatically inherit the property.
In a remarriage, one plan is for each spouse to individually own some assets brought into the union. Each may be titled differently. You may want guidance from an experienced attorney.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
