Why You Shouldn't Enter A Joint Tenancy With Rights Of Survivorship

If you're an older parent who owns a retirement or second home, you may wish to keep the home out of probate after your death. One of the methods you might choose is a joint tenancy with rights of survivorship, which is a deed that gives two individuals, such as a parent and child, equal shares of a home. However, it's a real estate planning option you should consider carefully. Your decision to enter a joint tenancy may come back to haunt you before you pass away. Here are reasons why you shouldn't enter a joint tenancy with rights of survivorship.

The Home Isn't All Yours

Joint tenancy with rights of survivorship gives you the right to transfer or deed real estate property to someone else. The property skips probate and goes directly to the other person upon your death. There's one major disadvantage of choosing a joint tenancy with rights of survivorship. The other person becomes a second owner of the home with just as many legal rights to the home as you have.

You can't sell, perform construction or rent out the home without the co-owner's consent or collaboration. For instance, if you choose to rent out the home for a year to earn extra income, you must tell the joint tenant about it. In addition, you must give the other owner half of the rental income you receive from the house.

The rules of a joint tenancy also apply to the other owner. He or she, can't legally earn rental income from the home without sharing half with you. If the co-owner rents out the home without your knowledge, you potentially lose money that can benefit your estate.

The Home's Upkeep Falls on You

The maintenance, upkeep and insurance coverage of the home are other issues you may face right off. You and your co-owner share equal rights when it comes to maintaining the home. If the other person refuses to pay for the home's repairs or monthly insurance coverage, the responsibilities fall on you.

Additionally, the home's owners must pay real estate or property taxes every year. States, such as California, allow you to make two payments or installments on the home's taxes. If the other owner doesn't pay half or any of the tax fees, you'll need to make a full payment on your first home and a full payment on the second house. The expenses may hurt your bank account as a result.

The other person may count on you to make the tax payments for several reasons:

• You don't want to lose the house to the state for unpaid tax obligations. The tax revenue office and state can garnish your income or assets to pay off any unpaid taxes you owe.
• You don't want to ruin your credit. The tax revenue office reports delinquent tax obligations to all three credit reporting agencies, which may affect any other real estate purchases you make in the future.
• You don't want to lose the money you invested in the home to buy it. 

The co-owner receives the benefits of owning a home without the responsibilities of maintaining one. 

The Deed Is a Permanent and Binding Document

If the other tenant decides to live in the home after you make him or her an owner, you can't do anything about it. Additionally, you must share the accommodations when you retire or choose to live elsewhere. You can't force the other joint tenant out, nor lock or board up the home. Once signed by you and the other person, the tenants in common deed is legally binding.

Tips

Although you don't want your property to go through probate after your passing, it may be a better deal than entering a joint tenancy agreement. You can take steps to secure your real estate and assets by:

• Maintaining excellent credit with your bills, taxes and personal expenses, which speeds up the probate process because you don't owe creditors or have other debts to pay
• Hiring a real estate attorney to help you make sound investments that increase your estate
• Planning how you wish to leave your second home, as well as other assets, after death

If you want to keep your second home safe from probate without risking your property in a joint tenancy with rights of survivorship, contact a real estate lawyer for assistance. The more you understand and know about your rights as a homeowner and investor, the better off you'll be now and after death. Click here to learn more about this topic.