The Problems with Joint Tenancy Ownership
In most cases, parents should not enter into joint tenancy
ownership with their children. If you want to avoid probate, you can designate
your children as the beneficiaries upon your death.
Traditionally, joint tenancy ownership of real estate and
bank (or other) accounts has been considered a fairly simple method of
transferring assets upon death. That's true ... if everything works out okay.
Let's consider a fairly common scenario. Mom has three
children, a house and bank accounts. She puts her son's names on the house and
each of the bank accounts. Sonny, of course, is a good citizen; he knows the law
requires him to have auto insurance, and he dutifully has the state-required
One Friday evening, Sonny stops in at the bar on the way
home. One drink leads to another, which leads to another. Before long, Sonny
says his goodbyes and climbs behind the wheel of his car to go home and has an
accident, permanently incapacitating a child.
The child's parents sue Sonny. His insurance company
defends the lawsuit, but, ultimately, the plaintiff is able to get a judgment far
in excess of Sonny's insurance coverage.
Plaintiff's attorney starts looking for assets and finds
that Sonny is a part-owner of a residence and several bank accounts. Thinking
that he's hit the gold mine, Plaintiff's attorney starts proceedings to seize
the bank accounts and the house to pay for the judgment.
Can't happen? It does happen. Ultimately, Mom will most
likely be successful in defending the plaintiff's claims because Arizona law
provides that joint tenancy property is owned by the owners in the percentage of
the joint tenant's contribution to the asset. However, vindication may come only
after Mom hires an attorney to defend her and incurs a $20,000 (or higher) legal
Sonny turns out to be a good driver and skips the bar on the
way home. Mom puts Sonny's name on the joint tenancy accounts and then dies.
She's probably thinking that Sonny is going to split the assets with his
siblings. But, by law, Sonny doesn't have to split with anyone! He is the
surviving joint tenant entitled to the account on Mom's death. The other
siblings might be able to prove Mom's intent, but only after taking Sonny to
The lesson to be learned from these two examples is that
parents should not enter into joint tenancy ownership with their children. If
worried about having to go through probate, she can designate the children as
the beneficiaries upon her death. This is done by using a “beneficiary deed” for
real property and by designating the children as beneficiaries of accounts
(i.e., “payable on death” designees).