The Hidden Perils of Joint Ownership - Part Three

Problem No. 4 – Loss of Control

In general, a joint owner cannot mortgage or sell property without consent from the other joint owners. While this may seem like an unlikely problem when the adult child has a close relationship with their parent(s), many clients won’t want to have to ask their children if they can sell their house if they decide to move out.

Problem No. 5 – Misunderstood and/or Unknown Estate Implications

First, regarding taxes, holding property jointly with children does not split the property in half for purposes of determining estate tax liability. When the parent passes away, they will have to include the entire value of the asset in their estate for purposes of determining any tax liability. The same is true for the adult children. Thus, if a child predeceases their parent, they will have to include the entire value of the asset in their estate for determination of estate tax liability.

Second, many people believe that holding property jointly will avoid any interaction with the Probate Court. This is generally an incorrect assumption. In Connecticut an estate tax return for a taxable estate is filed with Department of Revenue Services (with a copy to the Probate Court); a return for a non-taxable estate is filed with the Probate Court only. Regardless, holding property jointly does not avoid the need to file the return.

In the event that there is Connecticut real estate, a return will need to be filed and the Probate Court costs will need to be paid before releases of estate tax and Probate fee liens will be granted. If this is not done, it is unlikely that a title company will insure a transaction. This can be a major problem if the joint owner doesn’t find this out until after receiving an offer.

As you can see, holding property jointly can produce some unfortunate consequences. That being stated, holding property jointly can also be a useful planning tool in the context of your entire Estate Plan. If you would like to explore this topic further, please give us a call at (203) 651-5521 or use our online contact form HERE.