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The Benefits and Potential Pitfalls of Joint and Survivor Ownership

For many decades, it has been common for two or more parties to own real estate or investment accounts as “Joint Tenants with Rights of Survivorship” (JTWROS). This has been a popular way to avoid the extra delays and costs of probate administration following the death of one owner.  Generally, the surviving owner will inherit the property more quickly and less expensively than through a Will. However, joint ownership should be very carefully considered due to the consequences, and potential pitfalls of this type of ownership.

First of all, the “joint” portion of the ownership means that all of the owners have immediate rights of ownership. This can be a problem if one of the owners becomes subject to legal collection proceedings or other calamities such as a contested divorce. Therefore, we do not advise ownership in this form unless it is between spouses.  Upon the death of the first spouse, the survivor will be able to put the property into his or her own name quickly and efficiently.

Secondly, following the death of one owner, the assets will pass to the survivor regardless of the possible contrary intent of the decedent.  We have seen the situation where the client intends his or her assets to pass to their children, equally. However, without fully understanding these consequences, the client may have put a large Certificate of Deposit with one child as JTWROS co-owner.  Or maybe this was intended only to allow that child to assist the parent by having access to the funds.  Although it may have been the parent’s intent that the Certificate of Deposit pass to all children, equally, the Ohio Supreme Court has held that joint assets pass to the surviving owner regardless of any other intent of the decedent. Only fraud and duress can set such a conveyance aside.

If it is beneficial to have the assistance of an adult child with account management, the best avenue is through a General Durable Power of Attorney. If probate avoidance is paramount, then we suggest instituting a different type of ownership, commonly known as Transfer on Death or Payable on Death.

If you have questions concerning these issues or other similar issues, please call us at any time.

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