Previously, I discussed Joint Tenancy, and focused on JTWROS. I discussed how JTWROS led to capital gains issues. For that post, click here.
Focusing on inheritance, Joint Tenancy with Right of Succession (JTWROS) is in part about Succession. If one person dies, the other often succeeds them in full title (100% ownership) of the asset. Sounds simple, and there is no problem if two people are involved. It is based on the Common-Law Presumption of Advancement, which basically means a property transferred to a spouse or child is presumed to be a gift and owned by the spouse or child.
However, recent court cases have a new consideration: the intent of JTWROS must be clarified. Is JTWROS only to help an aging parent manage their finances? Or is it used for inheritance purposes? Or both? For more, read about the Pecore and Sawdon cases. They are too complex to describe in a blog. However, it is helpful to imagine the following: at if one child gets JTWROS on a very valuable asset, and inherits the asset directly (bypassing the Will), another beneficiary of the Will may challenge that in court. The intent of JTWROS should be documented carefully.
Per Wendy Templeton, Joint Accounts have been characterized as a “poor man’s estate planning at best and a litigation nightmare at worst”. Please see a legal professional when discussing your inheritance matters.