“It’s important to understand the consequences of joint ownership of property,” caution the authors of theIndiana Laws of Aging Handbook. At Geyer & Associates, we agree. As we provide in-depth counseling to individuals and families, we find that in many instances joint ownership seems in accordance with clients’ objectives, but it should not be used as a substitute for a will or trust.

There are three basic types of co-ownership of property:

  1. Joint ownership with right of survivorship
  2. Tenancies in common
  3. Community property (this applies in only nine states, not including Indiana)

Real estate ownership
It’s common for spouses to hold title to their home or other real estate in joint name with rights of survivorship. Under this arrangement, upon the death of either spouse, the property passes automatically to the other (no matter what the will might say to the contrary).  Two individuals not married to each other can hold property in this way as well.

Two people, whether married to each other or not, can also share ownership of property as tenants in common. When one dies, ownership of the property does not pass automatically to the other, but follows the instructions in the deceased person’s will.

Bank accounts
Spouses often have joint bank accounts and investment accounts. It’s also quite common for older people to have joint accounts with a child or other trusted relative.  Sometimes this is done for convenience, because the older person might have trouble getting to the bank or is anticipating an illness or recovery from surgery. As the Indiana Laws of Aging Handbook points out, “Typically the elderly person has no intention of giving the child or relative any rights to take and keep the money now.”

Under Indiana law, any party to a joint account may withdraw all or part of the funds without the consent of the other. Any money remaining in the account when one joint owner dies belongs to the survivor named in the account (even if the will says otherwise). 

Bank accounts may also be set up as “Transfer on death” (TOD) or “pay on death” (POD), which is like putting a beneficiary designation on a bank account. Money in such accounts remains the sole property of the person who opened the account, and stays completely in that person’s control during his/her lifetime. Only upon death is money transferred to the persons named as recipients.

Joint ownership of property has its advantages, including convenience and probate avoidance. It also, as Harvey J. Platt points out in Your Living Trust & Estate Plan,  carries with it distinct downsides. We’ll be discussing some of those downsides in our next blog post….

– by Corrina A. Smith of Rebecca W. Geyer & Associates