Joint Tenancy with the Right of Survivorship and Transfer on Death Affidavits
The probate process is the court supervised process by which your assets change ownership after you pass away. Through the probate process, the court will ensure that your debts are paid and your assets pass to the beneficiaries named in your Will. If you die without a Will, Ohio law specifies to whom your property will pass.
While the probate process can be completed in as little as six months, it is not uncommon for the process to take much longer. There are costs associated with the probate process as well, such as executor fees, attorney fees, appraiser fees, and filing fees. Additionally, the probate process is administered by a court of public record. This means that many of the probate filings associated with probating your estate will be made available to the general public. Fortunately, estate planning tools are available that allow you to plan ahead in order to avoid the probate process and the burdens associated with it. Planning ahead can help save your family time, money, and stress at an already difficult time.
Two common planning tools are joint ownership of real property and Transfer on Death Affidavits. What follows is a brief discussion of joint ownership of property and Transfer on Death Affidavits. There are risks and benefits associated with each. While joint ownership and Transfer on Death Affidavits might be beneficial to some, they could be detrimental and costly to others. Whether these tools, or some other planning tools, are right for you depends on your own unique situation.
I. JOINT OWNERSHIP OF REAL PROPERTY. Joint ownership is one method by which real property, such as your home, can be kept out of the probate process. There are two types of joint ownership of real property in Ohio; Joint Tenancy with the Right of Survivorship and Tenancy in Common. Only Joint Tenancy with the Right of Survivorship will help avoid the probate process. Whether your property is owned solely by you, as a Joint Tenancy in Common, or as a Joint Tenancy with the Right of Survivorship depends on the language used in the deed.
Under Joint Tenancy with the Right of Survivorship, your ownership interest in the property will automatically pass to the surviving owner upon your death. The surviving owner will inherit your interest in the property regardless of any provisions in your Will. The property will not go through the probate process at all.
While Joint Tenancy with the Right of Survivorship is a useful tool, it carries with it certain risks. These risks are amplified when the joint owners are not married. For example, transferring the property from sole ownership to joint ownership could be considered a gift if the new joint owner is not the spouse of the original owner, thereby triggering gift taxes. Furthermore, the new joint owner accrues an ownership interest in the property, which means the new joint owner can pledge his or her interest in the property as collateral. Additionally, joint tenancy is not freely revocable by the original owner. It should also be noted that joint ownership could thwart a couple’s estate tax savings plan by increasing the value of the surviving spouse’s estate.
These are just a few of the possible consequences of Joint Tenancy with the Right of Survivorship. It is important to consult an attorney to discuss all of the possible consequences of joint ownership before deciding to transfer ownership of your property.
II. TRANSFER ON DEATH AFFIDAVIT. A Transfer on Death Affidavit is another method by which you can keep your real property out of the probate process. Through a Transfer on Death Affidavit, you can name a beneficiary who will automatically inherit your real property upon your death. Similar to a Joint Tenancy with the Right of Survivorship, the named beneficiary will inherit the property regardless of any provision in your Will and the property will not pass through the probate process at all.
Unlike Joint Tenancy with the Right of Survivorship, a Transfer on Death Affidavit does not give the named beneficiary any ownership interest in the property while the owner is still living. This means that the named beneficiary cannot encumber the property nor does it create any tax liability if the named beneficiary is not the owner’s spouse. Furthermore, the Transfer on Death Affidavit is freely revocable during the owner’s lifetime.
A Joint Tenancy with the Right of Survivorship Deed and a Transfer on Death Affidavit must be properly drafted and executed in order to achieve the desired result. Furthermore, these two tools are not beneficial to all people and could even bring about negative consequences for some individuals. It is important to consult an attorney to discuss whether these tools are right for your specific situation and to ensure that they are properly drafted and executed.
THE ABOVE INFORMATION SHOULD NOT BE CONSTRUED AS LEGAL ADVICE AND IT SHOULD NOT BE RELIED ON. EVERY SITUATION IS UNIQUE. YOU SHOULD CONSULT AN ATTORNEY FOR ADVICE THAT APPLIES TO YOUR SPECIFIC SITUATION.