Joint Property Ownership Has Its Perils

Joint ownership of property between people who aren’t closely related to one another, such as spouses, is rarely a wise idea, according to a recent article on Forbes.com.
Among the reasons cited in the story by attorney and contributor Stephen J. Dunn are:

Money

(Photo credit: 401(K) 2013)

  • “Joint tenancy of a bank or financial account facilitates embezzlement. Each joint tenant to a bank account has full right to make withdrawals from the account.  In one case, after an elderly woman added her son’s name as a joint tenant to her bank account, mysterious withdrawals of $300 to $400 each began appearing in the account every couple of weeks. Before long the withdrawals were several thousand dollars each.”
  • “Once a person’s name is added to the title of property, it can be undone only with his or her consent. In another case, after a woman’s husband died, she added her two sons’ names to the title of her house. The sons were in their 20s at that time.  Through the years, one son prospered, and the other did not. When the woman was dying, and getting her affairs in order, she concluded that the prosperous son did not need the house, and attempted to remove his name from it. The prosperous son balked, and the matter was litigated. The court held that placing the sons’ names on the title to the property was a completed gift to each of them, and their names could be removed from the property only with their consent.”
  • “Property held in joint tenancy is immediately subject to claims of each joint tenant’s creditors. In yet another case, a man bought a house and rented it to his mother. Their names were on the title to the house as joint tenants. Later the woman attempted to quit claim her interest in the house to the son. It turned out that the woman had longstanding, substantial Federal tax liabilities of which the son was not aware when he allowed her name to be placed on the title to the house. In attempting to collect the woman’s tax liabilities, the IRS found the recorded quit-claim deed. The IRS asserted that the quit-claim deed was avoidable as a fraudulent conveyance, and asserted a nominee lien in the house. The matter was litigated, and the U.S. District Court held, under developing Federal common law, that the mother owned a one-half interest in the house, and that the Federal tax lien against her attached to her interest in the house.”
  • “Joint tenancy can produce unintended results. In yet another case, a brother and sister each inherited several million dollars from their mother. Each of them established a joint bank account in joint tenancy with right of survivorship with the other, and deposited their inheritance into the account. The years went by. The brother and sister became estranged, and developed hostility toward one another. On his death bed, the brother executed a will bequeathing all of his property to his lady friend. But the bank account was not part of the brother’s estate. By reason of the survivorship provision, the bank account passed outside of probate to the sister by operation of law.”
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