Many times people try to avoid probate by holding their assets in Joint Tenancy. Joint Tenancy is the method of putting your child’s name on property or accounts. Any good attorney or estate planner should warn you of the possible risks.
If you hold an assets with a child and the child was ever held in a lawsuit, you could lose your asset. Once you hold the asset in Joint Tenancy with the child, it is then subject to any judgments that they may have placed on them.
Property held in Joint Tenancy with a child will lose half of the stepped-up valuation. Stepped-up valuation is a very important issue that needs to be of concern. If you bought your home in 1955 for $25,000 and today your home is valued at $200,000 after your death your child would only received the original cost basis of $25,000 and not the market value. They would have a big capital gains tax bill! However, if you would have passed the home to the child in a Living Trust they would have inherited the home at the market value and not had a capital gains tax due.
Precedence Over a Will
If you leave your assets in Joint Tenancy to one of your children. That one child does not have to honor your will. Because you gave it to them as a joint tenant they are a legal owner and do not have to share it with the other beneficiaries of your will.
The Living Trust is a better solution because it will protect your estate from your children’s creditors, avoid probate, maintain the full stepped up value to your assets, keep both federal tax exemptions, and pass your estate to your children the way you desire!