Many people mistakenly believe that having assets in joint ownership means their estate planning is complete. A form of joint ownership known as Joint Tenancy with Right of Survivorship allows property to pass directly to the surviving co-owner without court intervention upon the death of one owner. Because of this, some view it as an alternative to estate planning. However, this method often creates more problems than it solves.

Unless the property is held as Tenancy by the Entirety, a form of ownership allowed only in certain states, owning real estate as Joint Tenants may leave the property vulnerable to legal risks such as lawsuits and creditor claims if no additional legal protections are in place.

If one of the joint owners is in debt, creditors may assert claims against the entire property, which means even a co-owner with no connection to the debt may suffer consequences.

For example, if a parent co-owns property with a daughter, probate may be avoided upon the parent’s death. However, if the daughter loses her job and cannot pay bills, or is involved in an accident with liability exceeding her insurance, or if she goes through a divorce, those issues will affect not only her but also the parent.

Joint ownership of a home or bank account with a child can also lead to family conflict. If there are multiple children and the parent owns assets jointly with only one child, the entire asset will pass to that child upon the parent’s death, potentially creating a sense of unfairness and discord among the siblings.

Even when all children share joint ownership, managing a single asset among several people can be a major source of difficulty. In short, joint ownership only temporarily bypasses probate.

Take, for instance, Mr. Kim and his wife who jointly own a house. If Mr. Kim dies, the house will pass to his wife. However, if she later dies without an estate plan, the property will eventually go through probate. And if Mr. Kim is still alive but becomes incapacitated due to a stroke and is unable to sign legal documents, his wife may need to go through living probate (also known as guardian proceedings) in order to sell or refinance the property.

Joint ownership, in the end, still often leads to a probate process that costs both time and money. A more prudent solution is to establish a Living Trust, which can address both present and future concerns.

By transferring assets into the name of a trust, you maintain control of the assets during your lifetime, and they can be distributed to beneficiaries without probate upon your death. A well-crafted trust can also protect assets from lawsuits, divorces, and creditors, while providing potential benefits in terms of capital gains, estate, and gift taxes.