How to Handle Jointly Owned Assets in Probate?

How to Handle Jointly Owned Assets in Probate?

When a loved one passes away, their estate often goes through a process known as probate—the legal procedure for distributing a deceased person’s assets. One aspect of this process that can be particularly tricky is handling jointly owned assets. Whether it’s a jointly owned home, bank account, or investment, these assets may or may not pass through probate, depending on the type of ownership and the specific state laws involved.

In this blog post, we’ll explore the different types of jointly owned assets and how they are handled during probate.

1. Types of Jointly Owned Assets

Jointly owned assets generally fall into two main categories:

• Joint Tenancy with Right of Survivorship (JTWROS):
  This is a type of ownership where two or more people own an asset together, and upon the death of one owner, the surviving owner(s) automatically inherit the deceased person’s share. JTWROS assets typically do not go through probate because the ownership transfers directly to the surviving party.
• Tenancy in Common (TIC):
  With Tenancy in Common, each owner holds a distinct share of the property. Unlike JTWROS, when one owner dies, their share does not automatically pass to the other owners. Instead, the deceased’s share becomes part of their estate and may need to go through probate, depending on whether a will or trust dictates the transfer.

2. How Joint Tenancy with Right of Survivorship Affects Probate

For assets owned under Joint Tenancy with Right of Survivorship, probate is usually not required. Upon the death of one owner, the surviving owner(s) automatically take full ownership of the property without involving the probate court. Examples of such assets might include:

• Joint bank accounts:
  Funds in joint accounts automatically transfer to the surviving account holder.
• Real estate:
  If real estate is held in joint tenancy, the property passes directly to the surviving owner(s).

While this avoids the probate process, it is essential to ensure that the joint tenancy agreement is clear and properly executed to prevent any disputes.

3. Handling Tenancy in Common in Probate

When property is owned as Tenancy in Common, the deceased person’s share becomes part of their estate and is typically subject to probate. In this case, the following steps are usually taken:

• Valuing the Deceased’s Share:
  The share of the deceased must be appraised and added to the value of the estate for distribution to the heirs or beneficiaries.
• Distribution According to the Will or State Law:
  If the deceased left a will, their share is distributed according to their wishes. If no will exists, the state’s intestacy laws will determine who inherits the share.

This process can delay the transfer of ownership and may require the sale of the property if the estate lacks liquidity to settle debts.

4. Community Property with Right of Survivorship

In community property states, spouses may hold assets as Community Property with the Right of Survivorship. This means that upon the death of one spouse, the surviving spouse automatically inherits the deceased’s share of the community property without probate. However, any separate property (owned by one spouse individually) may still need to go through probate.

If you reside in a community property state, this can provide an efficient way to pass assets to your spouse without the involvement of probate courts.

5. Jointly Owned Bank Accounts

When a person passes away with a jointly owned bank account, the account’s funds usually transfer automatically to the surviving owner. However, it’s important to note that:

• If the account was only used for convenience (e.g., someone added as an account holder to assist with bill payments), the funds may still need to go through probate, depending on state laws and the intentions of the deceased.
• To avoid confusion, it’s a good idea to specify the ownership intent of joint accounts before the need arises.

6. The Importance of Proper Estate Planning

Jointly owned assets can complicate probate if they are not structured correctly. To avoid confusion, disputes, and unintended consequences, it’s essential to work with an estate planning attorney who can help you determine the best way to hold ownership of your assets. Some things to consider include:

• Review ownership designations regularly:
  Life events such as marriage, divorce, or the birth of a child may require changes to how your assets are held. Regularly reviewing your ownership designations can help avoid future disputes.
• Consider using a revocable trust:
  While joint tenancy can be useful, a revocable trust offers more control and flexibility over how your assets are distributed. Assets placed in a trust bypass probate and are distributed according to the terms you set.
• Communicate with co-owners:
  Make sure any co-owners of your jointly held assets understand the implications of the ownership structure, especially regarding what will happen upon your death.

Conclusion

Handling jointly owned assets in probate can be complex, but understanding the different types of ownership and how they are treated by the law is key to avoiding unnecessary complications. Joint Tenancy with Right of Survivorship can help avoid probate, while Tenancy in Common may require probate to distribute the deceased’s share.

At Dorsey’s International Realty, we specialize in guiding families through the probate process and ensuring that their real estate assets are handled smoothly and efficiently. If you have questions about jointly owned assets or how to structure your estate, we’re here to help.

Dorsey's Realty Disclaimer:

Remember, consult with an attorney who specializes in probate and trust matters to ensure that the disclaimer meets the specific legal requirements and addresses the unique circumstances of your situation. This disclaimer is a general example and may need to be customized to fit the specific circumstances and legal requirements of the probate estate or trust you are dealing with. It is always advisable to consult with a legal professional to ensure compliance with relevant laws and regulations.