Why are joint tenancy and transfer-on-death deeds limited?
Because they only work if people die in the exact order as predicted.
These tools are not fool-proof or fail-proof, and they are not the best form of estate planning. Instead, these types of beneficiary designations are a solution that involves “cutting corners,” and may be better than nothing but they are far from ideal. This article will explain some of the shortcomings of these tools.
Why do married couples prefer Joint Tenancy deeds in Oklahoma?
Joint tenancy deeds can be a wonderful tool. Here is how they work:
If a married couple owns their home in joint tenancy, and one spouse dies, the surviving spouse will inherit 100% of the house without having to go to court. This is a giant win for the couple.
You see, the default form of real estate title with multiple owners is tenancy in common. That is old legal language that means if multiple people own the real estate, each owner will pass on their interest down to their estate.
So if a married couple owns a home using the traditional, tenants-in-common, type of deed, and one spouse dies, the surviving spouse will not inherit the deceased spouse’s interest. Instead, that interest will flow down to the deceased spouse’s estate, which will include the surviving spouse, but also the children and other heirs.
Most married couples do not want their surviving spouse to be sharing ownership of the marital home with children. For these reasons, owning the property in joint tenancy is a great idea and solves this problem.
Why joint-tenancy deeds are not the best form of estate planning
Joint Tenancy is not a permanent, fail-proof form of planning to survives multiple different scenarios. It only solves one scenario: death of the first spouse. It does not provide a solution for simultaneous death of both spouses. It does not solve the issue of providing a home for the children or keeping the children or other heirs from having to go to court.
Joint tenancy does not provide solutions for incapacity or long term care. A joint tenancy deed does not protect the home from Medicaid. In sum, joint tenancy protects the surviving spouse after the death of the first spouse, but that is where the protection stops.
Transfer on Death Deeds are not comprehensive planning tools
A transfer-on-death deed, like a joint-tenancy deed, is also not a fail-proof form of estate planning. Many of the same reasons apply.
A transfer on death deed is a deed that conveys ownership to a designated person after the original owner dies. Sounds like a great idea for titling real estate. But the problem again has to do with alternate scenarios that are different from the scenario originally predicted.
The first issue is what happens if the designated person dies before the original owner. In that instance, the gift will lapse, meaning the transfer is not made and title remains with the original owner. When the owner dies, the property will go to the estate, which must be probated.
This problem could be solved with a trust. Trusts can distribute the property according to the many provisions (and back up plans) of the trust. But a transfer-on-death deed will merely list a successor’s name, with no other provisions.
Joint-Tenancy and Transfer-on-Death designations do no provide creditor protection to keep the property in the family
A trust can provide for creditor protection to beneficiaries. Transfer-on-death and Joint-Tenancy designations do not.
Comprehensive estate planning involves looking at all possible scenarios, and deciding what happens in each possible scenario. With a transfer-on-death deed, there are only a few scenarios where your decision will be carried out.
But these simple tools can’t provide more meaningful solutions. These tools can’t protect young children or young adults from mismanagement, creditors, divorce, bankruptcy or lawsuits. Yet, with proper estate planning, I can help the family’s assets weather any storm. It just takes proper planning and I can help you with that.
Oklahoma City Estate Planning Lawyer solves problems that joint-tenancy cannot
I help clients determine their vision, and then I create a plan to make that vision a legal reality. You don’t need to worry about which document we should use. Joint tenancy, wills, trusts, LLC’s. All of those are tools, but that’s not what I want you focused on.
I want to go over scenarios with you and focus on the outcomes you want. Then I will show you how we set up your plan to guarantee those outcomes. Contact our office to schedule a call.