Owning assets jointly with one or more of your children or other heirs is a common estate planning “shortcut.” But like many shortcuts, it may produce unintended — and costly — consequences, and may not even be effective in Louisiana.
Joint Ownership Advantages
There are two potential advantages to joint ownership: convenience and probate avoidance. Outside of Louisiana, if you hold title to property with a child as joint tenants with “right of survivorship,” when you die, the property is transferred to your child automatically. You don’t need a trust or other estate planning vehicles and it’s not necessary to go through probate.
This strategy is not an option in Louisiana because our legislation does not recognize “right of survivorship.” Probate avoidance can only be achieved with a trust in Louisiana, with the exception of certain non-probate assets like life insurance and pay-on-death accounts.
Joint Ownership Disadvantages
Joint ownership can offer that aforementioned shortcut for non-Louisiana residents, but joint ownership can also create a number of problems, even in Louisiana. The disadvantages can include:
Adding a child’s name to the title may be considered an immediate taxable gift of one-half of the property’s value. And when you die, the property’s value then will be included in your taxable estate, although any gift tax paid with the original transfer would be allowed as an offset.
Joint ownership exposes the property to claims by your co-owner’s creditors or a former spouse.
Loss of Control
Your co-owner may be able to dispose of certain property without your consent or prevent you from selling or borrowing against certain property.
If your co-owner predeceases you, his or her share of the property may pass according to his or her estate plan or the laws of intestate succession. If you hold the property as co-tenants, instead of joint tenants with the right of survivorship, for instance, you’ll generally have no say in the ultimate disposition of that portion of the property.
A Trust May Be the Answer
If your goal is to avoid probate, one or more properly drafted trusts can help to avoid the problems outlined above, especially in Louisiana. If you jointly own assets with family members or friends and have concerns about probate, please contact us.
Theus Law Offices specializes in a complete range of estate planning and elder law services, including wills, trusts, probate, successions, estate administration, and probate litigation. If you need a Louisiana wills and trusts lawyer or succession attorney in Alexandria, Lafayette, Lake Charles, Baton Rouge, New Orleans, Shreveport, Monroe, or elsewhere in Central Louisiana, let our certified estate planning specialist and probate lawyers help you.