The Pros and Cons of Joint Tenancy in Estate Planning

The primary goal of estate planning is to streamline the transfer of your assets to your loved ones and avoid the complications of probate. One of the most common strategies used to achieve this goal is joint tenancy – a form of co-ownership where two or more people share equal rights to a property, with the surviving owner automatically inheriting the other’s share. 

While joint tenancy can streamline the process of asset transfer and help avoid probate, it is not without risks. From potential ownership disputes to unintended tax complications, joint tenancy can have significant consequences depending on the circumstances. That’s why you need to work with an experienced Maryland estate planning lawyer to understand the pros and cons of joint tenancy and determine whether it is the right choice for you. 

How Does Joint Tenancy Work in Maryland? 

Joint tenancy is a form of property ownership where two or more individuals can hold equal shares in an asset, typically real estate, with the right of survivorship. What it means is that when one owner passes away, their share automatically transfers to the surviving joint tenant(s) without the need for probate. Joint tenancy is commonly used among spouses, family members, and business partners to ensure a seamless transfer of property upon death.

The Four Unities of Interest

Under Maryland law, for a joint tenancy to be valid, it must satisfy the four unities of interest. These include:

• Unity of Time: All the parties must acquire their ownership interest in the property at the same time.
• Unity of Title: All the parties must obtain their interest through the same deed or will.
• Unity of Interest: Each party must have an equal ownership share in the property.
• Unity of Possession: All parties must have the equal right to possess and use the entire property.

If any of these unities is broken – such as one party transferring their interest to another party – the arrangement might not be considered a joint tenancy. Instead, it might be considered a tenancy in common, where there is no automatic right of survivorship.

Advantages of Joint Tenancy in Maryland

Avoiding Probate

One of the primary reasons why joint tenancy is used as an estate planning tool is that it allows the property to pass directly to the surviving owner(s) without going through probate. Since the right of survivorship is built into the ownership structure, the surviving joint tenant automatically inherits the deceased tenant’s share, bypassing the time-consuming and often costly probate process. 

Straightforward and Convenient

Setting up a joint tenancy is a simple and straightforward process. It only requires a deed or title that establishes the joint tenancy with the right of survivorship. The lack of complications makes it an attractive option for those seeking to transfer property efficiently, particularly among spouses or family members. 

Equal Control over the Property 

Joint tenants have equal control over the property during their lifetime. Each party has the right to use, rent, or sell the property without needing the consent of the other joint tenants, offering a level of flexibility in managing the asset.

Immediate Access to the Property

One of the biggest advantages of joint tenancy is that upon the death of a tenant, the survivor(s) can get immediate access to their share of the property, without having to go through probate or wait for the court to make a decision. 

Disadvantages of Joint Tenancy in Maryland

Potential for Conflicts among Co-Owners

One of the major downsides of joint tenancy is that it can lead to disputes among the tenants. Since all parties have equal rights to the property, disagreements might arise over how the property should be used or maintained. This can be particularly problematic in cases where the tenants are not family members or related to each other, such as friends or business partners sharing a property. 

Risk of Severance

If one joint tenant sells or transfers their share to another party, the joint tenancy can be severed. This means the ownership structure could be changed to a tenancy in common, where there is no right of survivorship. If this happens, the property could be subject to probate, undermining the initial benefit of joint tenancy.

Exposure to Creditors

In Maryland, joint tenants are equally responsible for any debts associated with the property. If one joint tenant has financial issues, such as lawsuits or unpaid debts, creditors can place claims on the property, potentially affecting the interests of the other joint tenants.

Unintended Tax-Related Consequences

While joint tenancy might offer some tax advantages in certain situations, it can also complicate tax matters. For example, if the property appreciates significantly in value, the surviving joint tenant might face a substantial capital gains tax on the inherited portion of the property. Additionally, the transfer of property through joint tenancy can create gift tax issues, particularly if one joint tenant is added to the deed later in life.

Why You Need an Experienced Maryland Estate Planning Lawyer for Setting up Joint Tenancy 

When considering joint tenancy as an estate planning tool, it is essential to work with an experienced Maryland estate planning lawyer who can guide you through the nuances of this arrangement. While joint tenancy offers several potential benefits, it also comes with its own set of challenges and risks. Here’s how an experienced lawyer can help you. 

Assessing Your Needs and Goals and Determining Whether Joint Tenancy Is the Right Choice for You

While joint tenancy can streamline the transfer of property and avoid probate, it might not be the best option for every situation. Only an experienced Maryland estate planning lawyer can determine whether it is the right choice for you. Your lawyer can assess your specific needs, family dynamics, and long-term goals to understand what you are trying to accomplish by setting up a joint tenancy arrangement. They can also consider various other factors such as the type of property, the relationships between the joint tenants, potential tax implications, and the possibility of future conflicts.

Based on the aforementioned factors, your lawyer can determine whether joint tenancy aligns with your overall estate planning needs and goals. If they believe it is not the best fit, they can recommend other estate planning tools that might better suit your circumstances. 

For example, a revocable living trust or a testamentary trust might be more appropriate for ensuring your property is distributed according to your wishes without creating unintended consequences for your heirs. You’re your lawyer’s guidance, you can create a comprehensive plan that meets your goals and protects your interests.

Drafting a Legally Valid Joint Tenancy Agreement

If your lawyer believes that joint tenancy is the right choice for your estate plan, they can draft the agreement and take care of all the other paperwork involved. It is important to note that Maryland law has a presumption against joint tenancy.

Unless the deed clearly specifies the intent to create a joint tenancy with the right of survivorship, the property will be treated as a tenancy in common, which can lead to potential legal complications down the road. It’s why the language in the deed needs to be precise and unambiguous.

An experienced Maryland estate planning lawyer can make sure that the deed clearly specifies the intent to create a joint tenancy with the right of survivorship and meets all the required legal standards. 

Protect Your Property with Personalized Guidance from the Baddour Law Firm

Joint tenancy – if used correctly – can be an effective tool to make sure that your assets are passed on to your loved ones without unnecessary complications. At the same time, it’s not a one-size-fits-all solution for your estate planning needs. 

At Baddour Law Firm, we have extensive experience in estate planning and we know the advantages and limitations of joint tenancy as an estate planning tool. We can assess your unique needs and circumstances, determine whether joint tenancy is the right choice for you, and create an arrangement that reflects your wishes and protects your interests. 

Call us today at 301-494-2108 or use our online contact form to schedule a consultation with one of our top-rated Maryland estate planning lawyers.