Aloha. I’m Scott Makuakane with the Honolulu Elder Care Channel. I’d like to talk to you for a minute about joint tenancy. Joint tenancy is a way that you can hold title to an asset, whether it is a back account, or your house, or stock, your car, pretty much any kind of asset you own can be held by two or more people as joint tenants. And what that means is that if one of the joint tenants dies, title pretty much automatically passes to the surviving joint tenant or joint tenants. So, for example, husband and wife can own all of their stuff jointly. So, if something happens to one, title pretty much automatically passes to the other. But why not add the kids to the title too? I mean, that seems like a quick, cheap, easy estate plan. Right? And then, the oldest person in the family dies first. They always do that right? Well, in my family they don’t. A lot of times the younger people cut in line. So there’s a sort of built-in fallacy when it comes to joint tenancy that people will die in the right order.
But putting that aside, let’s say that my wife and I decided to put our two sons on title to all of our stuff. So far so good. Our anticipation is that the oldest person will die first, and then the next oldest, and eventually our two sons are going to own everything, and they are just going to live happily ever after. Well, unfortunately it doesn’t always happen that way. Let’s say that Kathy and I did that. We put our two sons, Ethan and Jesse, on title to all of our stuff. On title to our bank accounts, our house, you name it. Well, let’s say everything goes fine for 10 years, 15 years; everything is just running smoothly. But then one day one of our sons comes into the house and says, “Mom, Dad, I’ve got some bad news. My wife has left me. She wants a divorce, and she seems to feel that she is entitled to half of everything I own. And I seem to recall that maybe 10 or 15 years ago, you guys put me on title to your house and on title to your bank accounts. Is that true?”
Well, half an hour later, our other son comes into the house and says, “Hey Mom, Dad, I’ve got some bad news. Remember that car accident I was in about three years ago? Well, I got sued, these people have gotten judgment against me, and they are looking for assets to go after. You know, unfortunately, at the time of the accident, I didn’t have the money to pay my car insurance premiums so I didn’t have any insurance coverage. So, these people are actually trying to get their hands on my stuff. And I seem to remember that, I don’t know, 10 or 12, maybe 15 years ago, you guys put me on title to your house and on title to your bank accounts. Is that true?” Well unfortunately for my wife and me, yeah, it is true, and what that means is that there are at least two people out there who are very interested, very motivated, very able to get into our bank accounts, to force the sale of our house.
Now, if they managed to force the sale of the house, my wife and I would still get half of the proceeds, because we own half of the house, but that is great. Now, we have not enough cash to replace that house that just got sold out from underneath us. So, joint tenancy can be a really bad idea on both of those levels. On the level of the creditors, that’s the car accident guys, and the predators, that’s the ex-spouse, but here is another problem with joint tenancy. It sacrifices an opportunity to provide for, shall we say, adult supervision of our kids, who may need a little bit of adult supervision over their inheritance. You know, the fact that someone outlives you, doesn’t mean that they are going to be able to hold on to whatever they inherit from you for any length of time after you are gone.
I mean, think back to the time you were 18. If you, at age 18, had all of the sudden come into an inheritance, would you still have had it at age 19? So, joint tenancy is a wonderful way to give up control over your assets, surrender that control to the creditors and the predators that could be out there. And also a way to give up the opportunity to provide for supervision, provide some administration of the assets that you leave for beneficiaries, who may have bad habits, bad friends, or just a bad ability to hold onto money. So, just some things to think about when it comes to joint tenancy.