Some Legal Pitfalls With Joint Tenancy
If you thought it was difficult sharing the colored pencils in kindergarten, it can be doubly difficult co-owning real estate, especially if that co-owner is not your spouse. Joint tenancy with a nonspouse can introduce a host of unpleasant problems should the relationship sour.
Is joint tenancy ever a good idea? Only if you’re confident that the relationship will not sour. In joint tenancy, two or more persons share equal ownership of the same property. Although there are definitely advantages to this ownership structure (perhaps the biggest avoiding the cost and delay of probate in the case of a married couple), joint tenancy is not the best option for everyone. In joint tenancy, both parties have to consent to sell or encumber the property. Owning property with an ex-husband, estranged child or business partner with whom you are not on good terms could prove difficult when decisions like this have to be made.
The second pitfall of joint tenancy is the right of survivorship trumps privately-made wills. This means if you have arranged in your will for everything to go to your only daughter, and if your spouse shares joint tenancy with you, the property will go to your spouse regardless of what the will says.
Another potential negative of jointly-held property is that one owner may suffer the unfair consequences of another owner’s distressed financial situation. Judgment creditors of a single owner can demand that the indebted person’s portion of the property be sold to satisfy the debt. And in the case of an owner filing bankruptcy, the bankruptcy court could require that the property be sold to satisfy creditors’ claims.
Before you rush into a joint tenancy relationship, consider consulting an attorney. There are other real estate holding options, such as tenancy in common or tenancy by the entirety. To learn more, talk to a real estate lawyer who can help you choose the optimal way to handle your real property.