I hear potential clients all the time say, I don’t need a trust because I already but my, spouse, kid, grandkid, etc. on the title of my accounts and/or house. While it is true that doing this can avoid probate, it is only prolonging the time until probate is needed and it isn’t the best way to transfer assets. Let me show you why.

Let’s say Mom owns her house outright. She realizes that she is getting older and might actually die so she puts the oldest of her 4 kids on the deed with her. Her though process is that, when I die it will go automatically (sort of true) to my son and then he can split it with his siblings. The first problem here is that nothing happens automatically. Son still has to terminate the joint tenancy upon Mom’s death. It is not a complicated process as long as you have access to the original deed that created the joint tenancy and a certified copy of the death certificate. Once you have those two items, we can help draft an affidavit terminating joint tenancy so that it can go solely into Son’s name.

The next issue we have with this scenario is that upon Mom’s death, she think Son will split it with his siblings. While in most cases, Son will do just that, he has no legal obligation to do so. Once Mom dies, the house is his and the siblings have no right to get any part of it from him. If he wanted to he could sell it and keep all of the money for himself. Or let’s say that Son did have good intentions to split it with his siblings but he dies shortly after Mom and never transferred the house into all 4 siblings names. Because its in his name, the house has to go through probate court and just like we talked about in the probate section, that house is going to be considered his separate property and distributed according to law. If he is married and has kids, the wife now owns 1/3 while the kids own 1/3 and you can bet they aren’t going to share that with Son’s siblings at that point and they don’t have any legal obligation to do so. It will ruin the family relationship but that happens more often than now when it comes to inheriting money.

The last problem with joint tenancy is from a liability perspective. As mentioned above, Mom owns the house outright. Let’s say that while Mom is living, Son causes a car wreck that is pretty bad and gets sued for it. Well, because he is listed as a co-owner on Mom’s house, her house is now subject to the law suit and the injured party can sue, foreclose and collect on Mom’s house to pay for Son’s debts. Its not just the house they can come after either, it could be anything to which he is listed as a joint owner. This is one of the best ways to make sure you don’t have any asset protection.

So how can you avoid all these pitfalls? The short answer is a living trust. Mom can name Son as the Successor Trustee when she passes and he could then manage the house for the benefit of his siblings, but he can never take it for his sole benefit. It also never becomes a liability concern either because the property never goes into Son’s name so even if he gets sued, that property never shows up in his name and cannot be part of the lawsuit or collections.

Now each situation is different and cannot follow a blanket roadmap. I still recommend that you speak with an attorney about your situation.