Q: IS JOINT TENANCY WITH MY CHILDREN A GOOD WAY TO AVOID PROBATE AND REDUCE TAXES?
People should be cautious when they try to avoid probate or reduce taxes with their children as joint tenants for three reasons:
- First, the child's share of the property becomes subject to the child's creditors, including people who win lawsuits and legal judgments against them.
- Second, the child would lose half of the potential "stepped up" valuation to market value of any appreciated asset inherited, which eventually results in more income taxes being paid.
- Third, the joint property passes automatically to the surviving child which may result in property distributions contrary to your wishes if other beneficiaries are involved.