THE DANGERS OF TITLING PROPERTY WITH ANOTHER PERSON

 

When clients first come in for an initial consultation, they will sometimes ask about the idea of titling their real property or other assets jointly with their adult child or another person (known hereafter as co-tenant).  Although joint ownership can sometimes avoid probate and enable the transfer of title upon the death of the first co-owner if properly titled, the reason why doing this is not a good strategy is due to the danger involved; namely, the risk of unforeseen life changes or events in the life of your child or co-owner which can seriously pose a risk to your assets, creating costly and unintended consequences.  Some of these risks and consequences may include:

Improper Titling and/or Unintended Consequences:  If the new title or deed wherein you gift a part of your asset(s) is not carefully drafted, and as a result the person now owning property with you is added as a co-tenant instead of a joint tenant with right of survivorship, then upon your co-tenant’s death, his or her share would pass to that person’s heirs as opposed to passing to you (and vice-versa).  Therefore, if you hold as co-tenants, you’ll generally have no say regarding the final disposition of your co-tenant’s share.

No More Exclusive Control:  If you title your assets together with your co-tenant and then you change your mind and decide you didn’t really mean to gift a part of it and would like to be the sole owner again, your co-tenant may rightfully refuse.  In addition, your co-tenant may both prevent you from borrowing against and/or selling certain property and/or may dispose of certain property without your consent.

Accidents or Medical Bills:  If a judgment is entered against your co-tenant as a result of an accident or unpaid medical bills, the assets you hold together could result in judgement liens against such assets.

Divorce Proceedings:  Spouses, along with the IRS (see below), may be considered a “super creditor”.  This means that if your co-tenant gets divorced your co-tenant’s assets may  be subject to distribution by the Court, and consequently any assets you hold together with your could very well be distributed as part of the divorce.

IRS Proceedings:  If your co-tenant owes money to the IRS, the IRS may place tax liens on the property, including on any assets you own jointly.  In addition, adding your co-tenant’s name to the title may be considered a taxable gift, and upon your death the property’s value will then be included in your taxable estate.

Bankruptcy:  Similar to divorce and the IRS, if your child files for  bankruptcy at some point in the future, the bankruptcy trustee can attach your child’s assets –  and at that point you can no longer take back the assets you gifted even if your child is willing to return such assets.

Contrast the foregoing risks with the use of a Revocable Trust.  A Revocable Trust, unlike a stand-alone Will, is an estate planning tool which, when properly drafted, executed and funded, will reduce or avoid probate administration of your estate following your death.  In addition, a Revocable Trust will allow you to title your assets in the name of your Trust without exposing your assets to your child(ren)’s creditors during your life, while allowing you to designate your children as beneficiaries of those assets. There are also asset protection advantages for your child(ren) with a Revocable Trust following your death; for example, you may choose to have your assets held in further trust until some point in the future when a financial threat(s) to your child(ren) has(have) passed.  In addition, your Trust will also allow you to designate a disability trustee to administer the assets in your trust in the event of your unexpected disability, and unlike a Will a Trust need not be filed with the Court following your death which generally results in greater privacy for your estate. 

Add Comment

20801 Biscayne Boulevard, Suite 300
Aventura, Florida 33180 (Main Office)

6625 Miami Lakes Drive, 3rd Floor
Miami Lakes, Florida 33014

1000 5th Street
Miami Beach, Florida 33139

Telephone Number: 786.262.5105

Monday - Friday, 8:30am-5:30pm

Serving Greater Miami and South Broward including: Aventura, North Miami Beach, Hallandale Beach, Sunny Isles Beach, Miami Beach, North Miami, Miami Shores, Miami Lakes, Doral, Hialeah, Hialeah Gardens, Pembroke Pines and Hollywood.

Translate »