A word of caution is necessary with respect to the use of joint tenancy deeds. Many people have come to Thompson Law Group, P.C. asking for the preparation of joint tenancy deeds. Frequently, they want to add a child to the title to their real property (make the child a “joint tenant” on the property), for the purpose of avoiding probate and transferring the property to their child upon their death. While it is true that a joint tenancy deed will avoid probate, it is not the only means of doing so, and may have serious adverse tax consequences as well as legal ramifications prior to the property owner’s death. If property is transferred by will or by beneficiary deed, upon the death of the owner, the heir will get what is called a “step-up in tax basis”. This may result in the elimination of part or all of any income tax on the sale of the property. The use of a joint tenancy deed will not provide a step-up in tax basis, and therefore may result in substantial income taxes on the subsequent sale of the property that could have been avoided. In addition to possible adverse tax consequences, the use of a joint tenancy deed places another person on the title to the property, and therefore the original owner cannot transfer sell, mortgage, or rent the property without the consent of the other joint tenant. The credit history of the joint tenant may be considered in obtaining financing. Perhaps of ever greater concern is that outstanding judgments or tax liens against the joint tenant that are recorded in the county where the property is located will attach to the title to the property as soon as the joint tenant is added to the title. This means that the joint tenant’s creditors may use the property (sell it) to pay any judgments or liens of the joint tenant.
While joint tenancy deeds are appropriate in some circumstances, Thompson Law Group, P.C. makes sure that its customers are advised of the potential disadvantages of joint tenancy, and the other options for transferring property and avoiding probate that are available to its clients.
The Thompson Law Group, P.C. is committed to providing quality legal service at reasonable rates. We generally provide our documentation preparation services at a flat rate so that the fees are certain. If is necessary to provide additional services, such as review additional documents, chain the title, etc., in order to prepare the necessary documents or cure title defects, we inform clients of any additional expense prior to commencement of any work to avoid any confusion about fees or additional work to protect a client’s transaction and make it valid.