Some individuals add their children or other relatives to the title on property they own in an attempt to avoid probate. Although this can avoid probate, it can also create more problems than it actually avoids.
Types of Real Estate Ownership
Joint ownership in real property simply means that more than one person shares the title to that property. The joint owners are referred to as either “joint tenants” or “tenants in common.” With joint ownership, both owners have the same right to the property and the same obligations as well. For instance, all owners must consent to mortgaging or selling the real estate.
When a tenant in common dies, his or her share will go to the heirs at law. Often, a probate is required for the transfer. When a joint tenant dies, the surviving owner or owners inherit the property interest of the deceased owner, by operation of law. The joint tenancy property does not have to go through probate proceedings. The title to the property is easily transferred by executing and recording an affidavit of survivorship after an owner passes away.
Joint Tenancy Creates Multiple Decision Makers
Although joint ownership comes with the advantage of avoiding probate, it also brings with it the possible disadvantage of multiple decision makers. What this means is, if you choose to add your child to the title of your home, you will no longer be the sole decision maker regarding what happens to your home. You will now need the consent of your child before making repairs or getting a second mortgage, for example. All owners of joint property must sign the deed or mortgage for these legal documents to be valid. You cannot sell the home without the consent of the other joint owners.
With joint ownership also comes the joint obligation to pay property related expenses. Because of this shared burden, joint owners may not always agree on actions to be taken with the property, such as the type of repairs needed or whether the cost of those repairs is reasonable. Further, if one of the children becomes liable to a creditor, from a lawsuit for instance, the property could be at risk.
Joint Owners Are Free to Do as they Like with their Interest
Another drawback of joint ownership is the fact that one owner may decide to sell or transfer their interest in the property. For example, if your child is experiencing financial problems, he or she may decide to sell their share, or even a portion of their share, in order to meet some financial obligation. A more serious problem could occur if your child files for bankruptcy and the joint property you share is not a homestead. In that situation, even though the property is jointly owned, the child's share would not be exempt from creditors.
If some of these issues concern you, there are several alternatives to joint ownership that you can consider, which may still achieve your estate planning needs or goals. Be sure to consult with a Nevada Estate Planning Attorney before taking that step toward joint tenancy. Consider all of your options before you decide whether joint tenancy is the best solution for you and your family.