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Does Jointly Held Property Avoid Probate?

Jointly held property can be used with numerous types of assets. This includes real estate, bank accounts, and just about any other type of asset that you can own individually. When such property is owned as joint tenants with full rights of survivorship, the assets pass to the survivor at death. Often times, a husband and wife will own property jointly.

The Problem with Jointly Held Property. In many instances, jointly held assets passes the property onto the surviving spouse without tremendous difficulty. So, for instance, when mom and dad own the house jointly, upon death it passes the home to the surviving spouse without probate. A simple deed can accomplish this objective. The problem with jointly held property is not when dad dies, and it passes to mom. The problem occurs when mom tries to add children to the deed, bank account or other assets as joint tenants. This typically takes place in the following type of scenario. Mom decides to add oldest son or daughter to the bank account to help her write checks. Mom then says to oldest son, “make certain to split everything equally with your remaining brothers and sisters when I pass.” Being an optimist, it is my experience that 70 to 80% of the time, people honor their parents’ request. However, the other 20% of the time, all kinds of things can go wrong.

Some other scenarios –

Mom passes and the child named on the bank account keeps all the assets. This, unfortunately, happens more often than people think. While there are ways to successfully challenge this abuse, often times the wrongdoer walks off with the asset. At times, these bank accounts can be quite significant.

Mom puts all the children on a deed for the home or cottage to avoid probate. Two years later, son, who has no improper intentions, ends up in a divorce. The spouse of son then argues that the property is part of the marital assets and further argues that it should be part of the divorce settlement. Consequently, the property can be tied up for some time.

Mom decides after adding the kids to the cottage up north, that she would like to sell the property. However, one of the children decides they do not want to sell. The end result is that you are locked into a legal action called a “partition” to try and separate the property. Even though this was just done to avoid probate, the consequence of adding children as joint tenants has many consequences.

Bottom line: jointly held property between children and parents as a method of avoiding probate is a bad idea.

Instead, I recommend the use of a Simple Trust. A Trust is really nothing more than a Will that avoids probate. In the typical scenario, it will provide that everything passes to mom or dad, and at their death, everything else is divided equally between the children. While there are obviously many more complex family situations that can be addressed through appropriate planning, this is the usual arrangement. If the Trust is set up properly, the property will pass to either mom or dad, and the balance will be divided simply between the children. This “Will that does not go through probate”, is an easy and inexpensive way to avoid the costs and time delay of a probate.