Joint tenancy is a form of ownership where upon the death of one of the owners the other owner retains 100% ownership in the property. Many people use joint tenancy as a seemingly simple solution for passing the family home to their children outside of probate. Unfortunately, this strategy may lead to future problems for both the parent and their child.
First, this may lead to tax burdens for the parents. When a child is brought on as a co-owner of the property, the parents will have to file a gift tax return for a portion of the gifted property, and the child will have to pay capital gains taxes if they ever wish to sell the property. Secondly, making the home an asset of the child creates potential liability concerns. If the child runs into financial trouble, gets divorced, or gets involved in a legal proceeding, it could compromise both the parent and child’s ownership of the home.
Call our office at 605-275-5665 to speak to any of our estate planning attorneys and make sure your children get the family home burden-free!