A word of caution is necessary with respect to the use of joint tenancy deeds. Many people have come to Thompson Law Group, P.C. asking for the preparation of joint tenancy deeds. Frequently, they want to add a child to the title of their real property (make the child a “joint tenant”), for the purpose of avoiding probate and transferring the property to their child upon their death. A joint tenancy deed will make the child an equal owner of the property. While it is true that a joint tenancy deed will avoid probate, it is not the only means of doing so, and may have serious adverse tax consequences as well as legal ramifications prior to the property owner’s death. If property is transferred by will or by beneficiary deed, upon the death of the owner, the heir will get what is called a “step-up in tax basis”. This may result in the elimination of part or all of any income tax on the sale of the property. The use of a joint tenancy deed will not provide a step-up in tax basis, and therefore may result in substantial income taxes on the subsequent sale of the property that could have been avoided.
In addition to possible adverse tax consequences, the use of a joint tenancy deed places another person on the title to the property, and therefore the original owner cannot transfer, sell, mortgage, or rent the property without the consent of the other joint tenant. The credit history of the joint tenant may be considered in obtaining financing. Perhaps of even greater concern is that outstanding judgments or tax liens against the joint tenant that are recorded in the county where the property is located will attach to the title to the property as soon as the joint tenant is added to the title. This means that the joint tenant’s creditors may use the property (sell it) to pay any judgments or liens of the joint tenant.
While joint tenancy deeds are appropriate in some circumstances, Thompson Law Group, P.C. makes sure that its customers are advised of the potential disadvantages of joint tenancy, and the other options for transferring property and avoiding probate that are available to its clients.
Thompson Law Group, P.C. is committed to providing quality legal service at reasonable rates. We generally provide our documentation preparation services at a flat rate so that the fees are certain. If is necessary to provide additional services, such as review additional documents, chain the title, etc., in order to prepare the necessary documents or cure title defects, we inform clients of any additional expense prior to commencement of any work to avoid any confusion about fees or additional work to protect a client’s transaction and make it valid.
DISCLAIMER The information provided in this website is meant only as a general description of the current laws as of the date of the writing. It is not meant to be an exhaustive discussion of all the nuances of the law and is intended to be only an overview. Many issues may appear simpler than they are, and an individual should always contact an attorney to obtain a complete, accurate interpretation of the law given the individual’s particular circumstances. Thompson Law Group, P.C. makes no representations as to how the law would affect a particular situation and intends only to illustrate areas of concern and give general information. ©2019, Thompson Law Group, P.C.
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