Joint ownership with right of survivorship—sometimes abbreviated JTWROS—can be beneficial because if one owner dies, the property transfers automatically to the surviving owner or owners, without the need for probate.
JWTROS is most common with the family home, usually owned by two people who are married. At the death of the first spouse, the home transfers automatically to the survivor.
Joint ownership is sometimes used by older people to plan to transfer assets to an adult child. For example, a parent might decide to jointly own his or her house, or investment account, with a child.
Is this a sensible strategy?
If a parent has joint ownership of an asset with one child and there are other siblings, the parent may desire that the proceeds of the house be evenly divided between siblings upon the parent’s death. However, joint ownership would generally override the legal obligation for the surviving joint owner to share the wealth.
Joint ownership can also cause problems if a joint owner runs into financial trouble. For example, bankruptcy or a large financial obligation by the joint tenant child can cause a parent to lose some or all of the jointly owned asset.
Depending on circumstances, naming a child joint owner on an asset may also have gift tax implications.
Joint ownership can make sense where an older person has only one heir, few assets, no gift or estate tax issues, and a desire to avoid probate. In other cases, especially involving children as joint owners, it should be thoroughly evaluated prior to implementation.