The Hidden Risks of Joint Ownership – What You Need to Know

When John and Mary bought their first home together, they wanted to ensure the surviving spouse would automatically inherit the property if something happened to one of them. They titled the house as joint tenants with rights of survivorship, thinking it would make things simple. Years later, when John’s health declined, they wondered if adding their son, David, as a joint owner on the deed would help avoid probate. It seemed like a logical step—but was it the right move?

Understanding Joint Tenancy and Tenancy by the Entirety

Joint ownership is often oversimplified as a “quick fix” to avoid probate. Many people don’t realize that naming someone as a joint owner is a legally significant decision that can have long-term consequences. There are two primary forms of joint ownership in New York:

1. Joint Tenancy with Rights of Survivorship (JTWROS) – When one owner passes away, their share automatically transfers to the surviving owner(s).
2. Tenancy by the Entirety – Exclusive to married couples, this structure offers additional protections, such as shielding the home from an individual spouse’s creditors.

While both may seem like convenient ways to transfer property outside of probate, they come with serious risks that can backfire if not carefully considered.

The Pitfalls of Adding a Joint Owner

1. Loss of Control Over Your Assets

Once you add someone as a joint owner, you cannot remove them without their consent. If David later refused to sign off on any sale of the property, Mary could be left in a difficult position.

2. Exposure to Creditors and Legal Issues

What happens if your co-owner faces financial trouble, gets divorced, or is sued? Their creditors may be able to place a lien on the property, even though you originally intended for it to stay within the family.

3. Unexpected Tax Consequences

Adding a joint owner may create unintended gift tax liabilities, and your heirs may lose the stepped-up basis for capital gains tax purposes when they eventually sell the home.

Historical Context: The Evolution of Joint Ownership

Historically, joint tenancy was favored as a simple estate planning tool before revocable living trusts became widely used. Today, trusts offer a more flexible and controlled alternative, allowing individuals to bypass probate without the risks associated with joint ownership.

What’s the Right Move?

John and Mary’s situation is common. Instead of adding a joint owner, a revocable living trust could have provided probate avoidance while allowing Mary to retain complete control of her home.

If you’re considering joint ownership, it’s crucial to consult with an estate planning attorney before making any decisions. The right strategy will depend on your unique circumstances, tax considerations, and long-term goals.

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