Joint tenancy with right of survivorship is a form of property co-ownership. All owners have equal shares, and if one owner dies, her share gets divided equally among the other owners. The right of survivorship trumps wills, so you can use it to bypass probate. You cannot, however, use it as a tax dodge.
If you live in one of the seven states that imposes an inheritance tax, you may have to pay the tax on the share of the joint tenancy you receive after the other owner's death. If it's a joint bank account you pay tax on the deceased's money, and if it's a house, you pay on the value of his share. If the joint tenancy was with your spouse, however, an exception applies: spouses never pay inheritance tax. The amount of tax depends on your relationship. In 2013 in Pennsylvania, for example, children pay 4.5 percent in inheritances, siblings pay 12 percent and everyone else pays 15 percent.
It takes an estate worth more than $5 million to trigger estate taxes, so for more than 99 percent of Americans, estate tax won't be an issue. If it is, the deceased's share of the asset you held in joint tenancy is subject to tax, just like the rest of her estate. You never have to pay the tax, but it could take a bite out of your inheritance. If you and your spouse are joint tenants, relax. Spouses don't pay estate tax when they inherit from each other.
If your father or your brother decides to skip probate by making you joint tenant on his house and his other assets, he may get a nasty shock. What he's done is make a gift of his property, and that could force him to pay gift tax. You won't have to pay the tax yourself, but if he's not aware of the risk, point it out to him. There's no gift tax if the gift is from your spouse, nor is there a gift tax if you add a name to a joint bank account. Gift tax -- like estate tax -- only comes into play, however, if you plan to leave an estate greater than $5 million. Most people just don't have to worry about it.
If someone wants to make you a joint tenant simply to avoid probate, take time to talk to her about her other estate planning. Suppose your mother wants to divide her assets between you and your sister, 50/50. If you take joint tenancy on the house and everything else gets split evenly, you wind up with a lot more than your sis. To keep everyone happy may require changing the will so it gives you less and your sister more.
A graduate of Oberlin College, Fraser Sherman began writing in 1981. Since then he's researched and written newspaper and magazine stories on city government, court cases, business, real estate and finance, the uses of new technologies and film history. Sherman has worked for more than a decade as a newspaper reporter, and his magazine articles have been published in "Newsweek," "Air & Space," "Backpacker" and "Boys' Life." Sherman is also the author of three film reference books, with a fourth currently under way.