Q: Last week you wrote about preferring transfer on death deeds to using joint tenancy, but I'm not sure why you are against the latter. My children have been joint tenants on my property for years without any problem.
A: If your goal is to transfer real estate outside of probate, I generally prefer using a Transfer on Death (TOD) deed to using joint tenancy. I'm not saying there is never a use for joint tenancy, but it's rarely my first go-to fix when planning for real estate.
My concern is that when you add a person as a joint tenant, you have given that person an ownership interest in your property. And, as I pointed out last week, a current ownership interest gives the joint tenant all the rights and obligations that ownership of real estate includes. It also exposes the real estate to all of the risks.
For example, you've indicated that your kids are on the title to your home as joint tenants. You didn't provide a lot of information concerning your kids, but it's not unreasonable to assume at least one of them is married.
What happens if a married child finds themselves in a divorce proceeding? It's not inconceivable that the joint interest in your home may find its way into the marital assets of the divorce. My family law colleagues would be in a better position to know for sure, but I'm guessing that it is at least possible that an interest in your home may be argued about in a dissolution hearing.
Another concern is that if a judgment is entered against one of your children who is also a joint tenant, a judgment lien could attach to their ownership interest in the home. If that happens, the best case scenario is that there is a cloud on the title to the home. Worst case scenario, you might find yourself in court trying to keep the judgment lien holder from foreclosing its judgment lien.
Same thing if one of your kids has a tax lien entered against them. My experience with the IRS has been that they aren't particularly nasty, but that doesn't mean that they aren't going to enforce a tax lien against property of the tax payer. I remember one situation when a bunch of siblings owned a home jointly and one of them had a personal tax lien attach to their interest. The IRS actually suggested that they sell the home, pay the IRS the total amount owed, which exceeded the value of the debtor's interest, and the debtor could pay back his siblings.
If you aren't concerned about liens on the home, how do you feel about needing your children's permission to sell or borrow against it? If they own an interest in the home, they are going to have to consent to anything you want to do with it. Also, if your kids would like to cash out of the house, they can pursue a partition suit against it and possibly force its sale. Yikes.
In most cases, nothing really bad happens when a child is added as a joint tenant to a parent's home. However, I'm all about avoiding problems rather than solving them later, and the fact that any of these things could happen is enough to scare me a little. A TOD deed may accomplish the same goals without opening the home up to all the risks that go with an ownership interest