The Pros and Cons of Joint Ownership for Estate Planning

The concept of joint ownership of real estate or other assets is simple. It’s when two or more people own something together, like a married couple who own a home or partners who own a business. 

There are benefits to joint ownership, but it’s not without risks. Here are some factors to consider when you’re deciding if joint ownership is right for your situation.

Whether you need homeowners insurance for your new house or you’re figuring out the best way to pass assets on to heirs, it’s a good idea to talk to Farm Bureau. We can help you understand and manage life’s decisions and transitions. 

Types of Joint Ownership in Real Estate

You can have joint ownership of real estate or other assets in forms like:

• Joint tenancy: Two or more people own property together, with equal rights and responsibilities. When one person dies, their interest passes to the others. This type of joint ownership is often called joint tenancy with rights of survivorship.
• Tenancy in common: Similar to joint tenancy, but each owner can leave their share to someone else, and ownership doesn’t have to be 50-50.
• Tenancy by the entirety: Spouses both have full ownership of property, and it passes to one spouse when the other dies. Unlike joint tenancy, it’s an option available only to married couples. 
• Community property: Spouses both own the property they acquired during their marriage.
• Common Law property: Property acquired during the marriage belongs solely to the person whose name is on the title, deed or who purchased it, unless both names are listed. 
• Trust: People put assets into a trust, and they serve as both grantors and trustees.

Pros of Joint Ownership

With joint ownership, you get some important benefits:

• Managing the assets may be easier. This can be important if one person has difficulty. managing finances, since another person can handle the responsibility.
• You may avoid probate, which is a way of distributing assets after death. Property subject to probate may take a while to go through probate court and may take a percentage of the total estate value for statutory professional fees or administrative fees. 
• It can make estate planning easier.

Cons of Joint Ownership

You can run into certain problems with joint ownership, such as:

• A situation where one partner wants to make decisions differently or sell their share.
• The arrangement bypassing the terms of a will.
• Risk of fraud, like if an elderly person adds a joint owner to their bank account who will have access to all of the money.
• Tax consequences such as unexpected gift, capital gains or estate tax liabilities¹.

You should talk with a professional before entering into any joint ownership agreement.

Important Decisions Deserve Professional Guidance

When you’re deciding what to do with your assets and how to protect them, there are a lot of factors to consider. At Farm Bureau, our agents can help find the solutions that are right for you, your situation and your family. Reach out to a Farm Bureau agent to start a conversation today.