One popular estate tax avoidance device is joint ownership of property between generations. Unfortunately, this device often leads to an ugly and expensive family feud. An article in Forbes discusses common pitfalls to be wary of when considering joint ownership between generations.
When you become a joint owner with another person, you become vulnerable to their creditors. Due to the very nature of joint ownership, one owner’s creditors can attempt to satisfy their claim through some or all of the shared assets. Similarly, if the spouse of one joint owner files for divorce, he or she may claim that the joint assets are part of the marital estate.
Another common pitfall arises when a joint owner decides to borrow from a joint asset, because joint owners can borrow from such assets without getting permission from the other. Finally, once you pass away, there is nothing requiring the joint owner to share the assets with other heirs unless they file a lawsuit to enforce the joint owner’s intent. Such lawsuits often end in bitter family court disputes.
If you are considering joint ownership as part of your estate plan, it is important to speak with an estate planning attorney about these and other pitfalls.