Problems with Joint Tenancy: Avoid Pitfalls in Estate Planning

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By: The American Academy of Estate Planning Attorneys
Joint tenancy is a popular way for two or more individuals to hold title to real estate or other property. When one joint tenant dies, that person’s interest in the property automatically re-vests in the surviving owners. People often use joint tenancy as a shortcut for avoiding probate, without realizing that this method of property ownership can create more problems than it solves.

Lack of Flexibility

One of the biggest drawbacks of using joint tenancy for probate avoidance is that this strategy takes away your flexibility as a property owner. Consider this: once you sign a real estate deed adding an owner, you can’t remove that person from your deed unless you have their signature. If you want to sell or refinance, you need your co-owner’s consent. While joint tenancy might simplify the transfer of your property at your death, it can complicate things during your lifetime.


In most states, the creditors of one joint tenant can reach the full value of the property, regardless of how much that person paid into the property. For example, let’s say you add your daughter as a joint tenant to the deed to your home. Your goal is for her to inherit the home at your death, and using joint tenancy, the property would avoid probate. But what happens if she loses her job and can’t pay her bills – or if she gets in a car accident and is sued for more than her insurance policy will cover? Whether it’s her fault or not, any bill your daughter can’t pay now becomes your problem, because she became a part-owner of your home. In most states, her creditors can look to the full value of your home to collect what she owes them.

Gift Tax

When you add someone to your real estate deed as a joint tenant, and that person does not contribute money toward the value of the property, the IRS deems this transaction a gift. In many circumstances, this means that at the very least you’d need to file a gift tax return. Depending on the value of the gift, you might also have to pay gift tax.

The rules are a little different for joint bank and brokerage accounts. Simply adding the name of a child or another person to your account does not constitute a completed gift. Instead, you might need to file a gift tax return when the non-contributing account holder withdrew assets from the account.

Family Tension

Parents often unwittingly create family tension when they add their children as joint tenants to their deeds or bank accounts. If a parent has several children, but only chooses one to serve as joint tenant, this means when the parent passes away, the asset in question automatically belongs solely to that child. Whether intentional or not, this unequal treatment can cause enormous friction among siblings.

On the other hand, some parents choose to include all their children as joint tenants. Unless the children are extremely cooperative, the task of working together to manage a single asset as joint owners can cause an incredible amount of conflict after the parent’s death.

Temporary Probate Avoidance

Finally, joint tenancy is only a temporary probate avoidance measure. Eventually, the asset in question will need to be probated, or another estate planning tool will need to be used. When the last joint tenant dies, there will be co-owner left for ownership to transfer to. At this point, title to the asset will transfer to the decedent’s heirs or beneficiaries through the probate process, unless further estate planning arrangements have been made.

There are a number of estate planning tools that offer the benefit of probate avoidance without all the drawbacks that accompany joint tenancy.

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