In an effort to avoid probate, some people simply add their children or other family members to the title on certain property. This method can work in some situations, but sometimes it can cause more problems than it avoids.
Types of Real Estate Ownership
Whenever more than one person shares ownership in real estate, they can be known as “joint tenants” or “tenants in common.” Joint tenancy means that both parties have an equal right to the property, as well as equal obligations as property owners. In a joint tenancy, both owners must consent to selling or mortgaging the property.
Upon the death of one owner of a joint tenancy, the surviving owner will automatically inherit the deceased owner’s interest. With this type of arrangement, the property is not required to go through probate proceedings. Instead, the title to the property is transferred by executing and recording an affidavit of survivorship upon the death of one owner.
Joint Tenancy Creates Multiple Decision Makers
With the advantages of avoiding probate, also come the disadvantages inherent in having multiple decision makers with regard to the property at issue. So, if you decide to add your child as a joint tenant to your home, for example, you will no longer be the sole owner or the sole decision maker as to what happens with that property. If you decide you want to sell the home or mortgage it to make repairs, you must first obtain the consent of your child. This cannot be avoided, as all owners of the property are required to sign the deed or mortgage in order for it to be valid.
With your child as a joint tenant, he or she will also have the right to be notified of and agree to any repairs or improvements. As the child will also have an equal obligation to pay any expenses related to the property, a problem may arise if your child cannot afford to pay expenses or maintenance costs. Having multiple decision makers can be difficult if you cannot agree on the type or extent of repairs that need to be done, or what a reasonable cost should be for performing the needed work.
Financial Issues to Consider.
With joint ownership comes a joint right to sell or transfer an interest in the property. This means that, should your child experience some type of financial difficulties, he or she has the right to sell a share of the property to meet financial obligations. Even more concerning, if a co-owner files for bankruptcy, and the joint property is not a homestead, that property will not be exempt from creditors, despite its joint ownership status. This would result in the other owner’s inability to sell or mortgage the property.
As with most things, there are various alternatives to joint ownership. You should consult with an Arkansas estate planning attorney before deciding on joint tenancy. Consider all other options and determine whether there is a better solution for you.