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Joint Ownership - "A Mixed Bag"
by Charles C. KellerYour mother, a widow, suggests she add your name on her deed and bank accounts "to help her out." This joint ownership with right of survivorship may have unintended consequences as well. Upon her death, jointly titled assets pass directly to the surviving joint tenant by operation of law or contract. But if your mother's intention was to treat all children equally, or if special gifts or directions were intended in her Will, these could be defeated and the roots of family discord may have been planted, unless you honor them. Taxwise, the Pennsylvania Inheritance Tax is levied according to the apparent percentage of ownership of the deceased owner. Therefore, in such jointly-held property, the survivor would pay tax only on one-half the value of the property. This tax benefit should be balanced against the possibility the younger person dies first. We have known a number of unfortunate instances where the surviv-ing mother ended up paying death taxes on her own property. However, the federal taxing rules are different for jointly-held property. The Feds presume the decedent owned the entire property, unless the survivor can prove contributions to the account or asset. You should be concerned about federal estate taxes if your estate exceeds $1,500,000 in 2004. We are sometimes asked by clients whether putting property in joint names will protect against creditor or divorce claims. The answer presents us with another "mixed bag." There are three kinds of co-ownership. "Tenancy by the Entireties" is limited to co-ownership of husband and wife and the creditor of one may not levy on property so held, at least until the non-debtor dies. But property held in "joint tenancy with the right of survivorship" or as "tenants in common" may be subject to levy by a creditor of one co-owner, or a marital claim. Such levy is likely to be limited to the value of the debtor's interest, thus creating a partition of the property. If the asset is real property or tangible personal property, a sale of the asset may be required. Is there another way to "help mother" without transferring property ownership through a co-tenancy? Happily, the answer is "YES." A carefully drawn Power of Attorney can be prepared to fit your needs, narrowly or broadly, giving as much help as is needed, and without changing her ownership of her assets. If the aid involves complex matters, such as Medicaid eligibility, our Elder Law attorneys are prepared to explore other available alternatives for you. Co-ownership of homes, businesses, bank accounts, securities and property of every kind can be a beneficial arrangement. But situations can differ dramatically and this tool may or may not be right for you. Both risks and benefits should be carefully reviewed before embarking on co-ownership of property. |
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