Mom or Dad has passed away. You or one of your siblings was named as a joint owner on some of Mom or Dad’s accounts or real estate. Maybe Mom or Dad told the joint owner to share the account or real estate with the joint owner’s siblings. What is the joint owner’s rights and obligations regarding the joint accounts or property? What rights do the joint owner’s siblings have in the accounts or property?
The general rule with joint accounts or property is that when a joint owner dies, the surviving joint owner or owners own the account or property. I call it the lifetime lottery, because the surviving joint owner wins it all.
You can have the best drafted will or trust in the world, but it does not mean anything if your property is not titled or beneficiaried properly to take advantage of that will or trust. What most people do not realize is that joint property and beneficiary designations typically bypass your will or trust.
It doesn’t matter what the deceased joint owner’s will or trust says. The joint account or property bypasses the will or trust by virtue of the joint ownership. About the only way to have a will or trust control joint property is to have a provision in your will or trust that says “I have a joint account number blankety blank at such and such bank with so and so, which is for convenience purposes only and not for the purposes of descent and distribution, and it is my intent that this account go in accordance with this will (or trust)”
If you were the only one on the account with Mom or Dad, all you have to do is take a certified copy of Mom or Dad’s death certificate to the financial institution holding the account along with picture ID and your Social Security number and the account is yours. No muss, no fuss, or so you think. If you were the sole joint owner of the account with Mom or Dad, you do not have to share it with anyone, regardless of what Mom or Dad may have said.
We get calls all the time from the children who were not named on the joint account with Mom and Dad. They usually state that Mom or Dad’s will says that everything was to be divided equally among the children and that Mom or Dad always said that they put one of the kid’s names on the accounts to avoid probate and so that the child named on the account could then easily share the account with their siblings after Mom or Dad passed. But Mom or Dad never put that in writing.
We are then the bearers of bad news. Unless Mom or Dad has indicated in writing somewhere that the accounts were to be shared, they are the sole property of the surviving joint owner. I have only seen it once in my thirty years practicing law that Mom or Dad did put it in writing that the joint account was to be shared by the surviving joint owner with their siblings.
Occasionally, we will see that the surviving joint owner does share the account with his or her siblings. However more often than not, the surviving joint owner will tell their siblings that Mom or Dad added their name on the account because Mom or Dad wanted them to have the account all to themselves.
With joint real estate, it is a little different. Generally, after Mom or Dad passes, if you are the surviving joint owner, you will record a certified copy of the death certificate at the county register of deeds office in the county in which the property is located and file a property transfer affidavit with the local assessor indicating that your joint owner died and that the deceased was a qualifying family member so that the taxable value does not go up to the current State Equalized Value.
If you as surviving joint owner are going to use the real estate as your primary residence, you should also file a homestead exemption affidavit in order to get the 18 mil break on school operating taxes. If the real estate was Mom or Dad’s primary residence with the homestead exemption, but you will not be using the home as your primary residence, you should also file a rescission of the homestead exemption with the local assessor.
When the home will no longer be homestead after Mom or Dad’s death, you as surviving joint owner may be tempted to not file the rescission of the homestead exemption to continue to get the 18 mil tax break. Do file it. The Michigan Department of Treasury has a computer program that cross references the social security numbers on the homestead exemptions to death certificates. You will then get a love letter from the Michigan Department of Treasury requesting that 18 mils each year since Dad or Mom’s death for up to the last four years, plus interest. Ouch!
Too often people think of joint ownership as a will substitute or mini estate plan. Unfortunately, we regularly see joint ownership crash and burn. We have seen parents lose their life savings after their joint owner child was sued and the judgment creditor garnished the joint bank accounts. We have also seen a parent property owner have to pay off an IRS tax lien against a child joint owner of their home, just so that they could keep their home.
Similarly after Mom or Dad’s death, children joint owners have lost their entire inheritance they received from Mom or Dad, after the surviving joint owner child was sued. Or half the child joint owner’s inheritance from Mom or Dad was lost to the child’s ex-spouse after a divorce property settlement.
In other situations, we’ve had to petition the court to appoint a conservator for an incapacitated joint owner in order sell the jointly owned home. There have been other circumstances come through our office in which a joint owner child refused to sign off on a deed when Mom or Dad wanted to sell the home, unless the joint owner child received their share of the proceeds of the sale of the home.
I have seen joint owner children in financial difficulty “borrow” from Mom or Dad’s accounts without Mom or Dad’s knowledge, and then be unable to pay it back because of their financial difficulty. In other situations, the joint owner child has just taken money out of Mom or Dad’s account because they believed they were entitled to it as their inheritance.
Joint ownership also has not worked when the joint owner child predeceased Mom or Dad; either the accounts go through probate or the children of the deceased joint owner child are disinherited when the account or property goes to the surviving children joint owners.
We regularly get calls from children after the death of Mom or Dad who were remarried to Thor or Bambi, and made Thor or Bambi joint owners on all their accounts; everything went to Thor or Bambi and the children ended up being disinherited
I only recommend joint ownership as an exclusive estate planning tool if you can guarantee that one of your joint owners doesn’t get sued, doesn’t get sick, doesn’t get mad, doesn’t get greedy and doesn’t die in the wrong order. And of course, you can’t. Joint ownership is not a substitute for a properly drafted estate plan which, at a minimum, includes financial and health care powers of attorney and a will, and often includes a revocable living trust. You can avoid these perils of joint ownership by eliminating your joint ownership and having a properly drafted will or trust based estate plan.
By: Matthew M. Wallace, CPA, JD
Published edited March 27th, 2016 in The Times Herald newspaper, Port Huron, Michigan as: My Joint Owner Died – What Do I Do Now?