Joint Tenancy in California: What Could Possibly Go Wrong?

Almost all homes, as well as other assets, owned by spouses in California are held in joint tenancy. Joint tenancy is a form of ownership where everyone on title owns 100% of the subject property. Generally speaking, as people die, the “last man standing” is the individual who will own the asset outright. Because nothing formal needs to be done, for many people this seems like a nifty way to avoid a California probate as well as the need for estate planning in California. Pretty smart right? Well, not exactly…

While it’s true that joint tenancy might avoid a probate and could alleviate the need for some estate planning, everybody should understand the risks involved with holding Joint Tenancy assets, especially in California. Some of the risks are obvious while others are shockingly california subtle. Below, I’ve grouped the risks into three major categories, starting with some of the more well known problems and then discussing some of the less obvious fiascos that California joint tenancies create:

Problem #1 – Who will be the ultimate owner of joint tenancy assets?

Most of the time, the “final” owner of joint tenancy property is a spouse (when title is solely held by a husband and wife). But after both spouses pass away, the question remains: who inherits then? If no estate planning is carried out before the death of the surviving spouse, joint tenancy assets will pass via “intestate succession” (i.e. how the State of California guesses you would have wanted it to pass). If you have the “Wally Cleaver” family this may not be an inheritance problem, per se, because the asset will be split and eventually distributed to the children of both husband and wife. Of course, there will likely be a long and costly probate court proceeding to make that happen but at least the assets wind up in the “right” hands.

So under the best case scenario, assets might pass the way parents want, but it will cost a significant amount of money and take (usually) one to two years in California. But what happens if we tweak the facts a little and/or the family dynamics are not perfect?

Answer: All sorts of wild things. And how often do these problems really occur? Answer: A lot.

For example, if a child predeceases a parent in California, and that parent held her house in joint tenancy with her son and daughter, that asset will end up 100% in the hands of the other surviving child, while cutting out the grandchildren of the first predeceased child. Most parents cringe at the thought of unintentionally cutting out legitimate heirs.

Another unintentional result occurs when a spouse or child is holding property in joint tenancy and then the child gets sued (because of a car accident, bankruptcy, etc.) and that creditor ends up attaching the property that mom or dad believed they solely owned. In other words, holding assets in joint tenancy gives potential creditors of your beneficiaries the right to seize your assets! Obviously, this is a horrible result when it happens.

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