The downsides of joint tenancy


Many bank accounts are owned by two or more people. This means that each individual has an equal right to keep or withdraw all of the property. Most joint accounts have an added element of designating that the survivor should receive the whole property. You may see the designation JTWROS which means joint with right of survivorship. Banks tend to encourage this registration but there can be danger in having two owners with equal power.

Bank accounts

Actually, joint accounts only postpone probate. When one of the joint tenants dies, the account is immediately owned by the survivor. This will mean probate for the survivor. The survivor can correct this problem by adding a new name but many times this does not happen. Incapacity of one of the owners can see the account frozen in a guardianship proceeding if the parties do not have the right documents to protect each other. If one of the owners has an accident or has creditor problems, the account is available for the creditors even if the one not in trouble actually contributed all of the money. The account is exposed to all of the problems of either owner.

Here is another example of a major problem. You have three children and you place your son’s name on the account for convenience.  If you pass away, the money belongs to your one son. It is only a promise that gets the money divided equally among the other children. If the son does transfer funds to the other children, there are serious gift and income tax problems.

It is not a good day when your son who is on your bank account gets divorce papers and your accounts are frozen by the bank until the matter is settled. You could easily lose one-half or all of the account to an ex daughter-in-law.

Real estate

If mother buys a home and adds the son’s name on as a joint owner, there can be a major tax consequence. If mom bought the home for $80,000 and it is worth $300,000 at her death, only one-half is reappraised with a step-up cost basis. Upon sale by the son, there is an income tax on his interest. If mom elects to sell during her lifetime, then she may only elect the federal income tax exemption on her interest. Had she owned the whole interest there would be no income tax upon the sale.

Serious problems can arise with real estate. Under Ohio law, a spouse must sign to legally transfer an interest in real estate. If you need to sell your house for your own finances or to downsize, you may find that your daughter-in-law may refuse to sign. Some banks may even offer an equity loan on the son’s interest and your home will be subject to a lien. It is easy to get a name on the title, but it can be difficult to get the name off. As with an account, if you place your son’s name on a deed, your home will be subject to the problems of your son.

It does not matter what you put in your will or trust. Neither document has any control over a Joint account or title to real estate. The asset will go to the survivor by operation of law.

Jeff Roth is a partner with David Bacon and Jessica Moon of the firm Roth and Bacon with offices in Port Clinton, Upper Sandusky, Marion, Ohio and Fort Myers, Fla. All members of the firm are licensed in Ohio and Florida. Roth’s practice is limited to wealth strategy planning and elder law in both states. Nothing in this article is intended for, nor should be relied upon as individual legal advice. The purpose of this article is to provide information to the public on concepts of law as they pertain to estate and business planning. Roth can be reached at or 419-732-9994.