It’s my birthday month, obviously September is one of the best months, for that reason, but it also, growing up on the east coast, was the start of a new school year and the change of the seasons. The weather got colder, leaves started to fall and sweaters were unpacked from the cedar chests. I always find that September it the best time to review and revisit goals and to-do lists. In the spirit of reviewing, look at your assets, are any of them in joint tenancy? This blog is going to look at why this might not be the best option and if that is the case for you, why not do a little “fall cleaning” and clean up some of those jointly owned assets.
Joint tenancy accounts have long been touted as a convenient way to pass assets to loved ones, avoiding probate and ensuring seamless transfer of ownership. However, in California, where laws and regulations regarding joint tenancy can be complex, there are significant risks that individuals often overlook. This blog explores the pitfalls of joint tenancy accounts in the Golden State, shedding light on how they can inadvertently expose individuals to creditors and lead to unintended disinheritance.
Understanding Joint Tenancy in California: Joint tenancy is a form of co-ownership where two or more individuals hold equal shares of property, such as bank accounts, real estate, or investments. In California, joint tenancy accounts come with the right of survivorship, meaning that when one joint tenant passes away, their share automatically transfers to the surviving joint tenant(s) without the need for probate.
The Problem with Creditor Exposure: One of the lesser-known risks associated with joint tenancy accounts in California is creditor exposure. Joint tenancy does not offer asset protection from creditors. If a joint tenant incurs debts or legal liabilities, creditors may seek to satisfy those debts by making claims against the jointly held assets, potentially putting the entire account at risk.
Moreover, even if the surviving joint tenant is not personally liable for the debts, their ownership interest in the joint tenancy account could still be subject to creditor claims. This can come as a shock to individuals who assumed their assets were shielded from such risks.
Distribution Challenges and Disinheritance: Another significant concern with joint tenancy accounts is the potential for unintended disinheritance. While the right of survivorship ensures that the surviving joint tenant(s) automatically inherit the deceased joint tenant’s share, it can bypass carefully crafted estate plans and familial intentions.
For example, consider a scenario where a parent adds one of their children as a joint tenant on a bank account for convenience purposes. Upon the parent’s passing, the account balance transfers directly to the surviving child, excluding other siblings who may have been intended beneficiaries under the parent’s will or trust. This can lead to familial discord and disputes over inheritance, undermining the parents’ original intentions.
Furthermore, joint tenancy accounts may not align with an individual’s overall estate planning goals. They offer limited flexibility and control over the distribution of assets, making it challenging to accommodate changing family dynamics, unequal distributions, or charitable bequests.
While joint tenancy accounts may seem like a straightforward solution for transferring assets in California, they come with significant risks that individuals must carefully consider. Creditor exposure and the potential for unintended disinheritance underscore the importance of seeking professional guidance when crafting an estate plan.
Alternative estate planning strategies can offer greater flexibility, control, and protection against creditor claims. By working with experienced estate planning attorneys, individuals can ensure that their assets are distributed according to their wishes while minimizing the risk of disputes and financial vulnerabilities for their loved ones.
Contact Mauriah Conway, Esq. to assist you with all of your Estate Planning, Probate and Trust Administration Needs (916) 920-5983.
Disclaimer: This blog post is for informational purposes only and does not constitute legal advice. Please consult with a qualified attorney for guidance specific to your situation.