In New York, many married couples share ownership of assets like real estate, bank accounts, and investments. While this setup offers convenience and shared control, it can also introduce risks that might affect long-term wealth. This blog explores the question: Are you risking your legacy by choosing joint ownership? Let’s look at the pros and cons of this decision.
Why Choose Joint Ownership?
Under New York law, jointly owned assets usually pass directly to the surviving owner when one owner dies, skipping the probate process. This might seem like a simple solution, but there are potential downsides. Jointly owned assets can still face estate taxes, creditor claims, and disputes among heirs, even though they avoid the court probate.
Example 1: Jointly Owned Real Estate
Jointly owned property can protect against creditor claims if only one of the owners has debts. For example, in New York, married couples can own property as “tenants by the entirety.” This means that creditors cannot force the sale of the property to pay off the debts of just one spouse.
However, if the property is sold while there is a creditor claim pending, this protection might change. If the sale proceeds are used to buy another jointly owned property, the protection might continue. But if the proceeds are split and used separately, creditors could potentially claim those funds.
The Risk Factor
One major risk of jointly owned assets is the lack of protection against creditors and potential legal issues. Except for real estate, New York law does not automatically protect jointly owned assets from creditor claims. In case of a lawsuit or financial crisis, these assets might be at risk.
Here are some scenarios where joint ownership can be risky:
- Death of a Spouse: If one spouse dies, the protection of jointly owned real estate is lost if the surviving spouse is the one getting sued. The property will lose its protected status and become vulnerable to creditor claims.
- Divorce: In a divorce, jointly owned real estate might be divided between the spouses. If the property is sold, the protection might end depending on how the sale proceeds are used. It’s crucial for divorcing couples to agree on terms that protect their assets.
- Estate Disputes: Disagreements between joint owners or their heirs can lead to lengthy legal battles. This can delay asset distribution and reduce the benefits of joint ownership. Sometimes, the assumption that assets pass automatically to the surviving owner can be challenged, leading to more complications.
Example 2: Joint Bank Accounts
Consider a jointly owned bank account. If one owner passes away, the account usually goes directly to the surviving owner. However, if the deceased owner had debts, creditors might still claim the funds in the account, putting the survivor at financial risk.
In conclusion, while jointly owned assets can provide benefits, they also come with risks. Understanding these risks and consulting with legal professionals can help protect your assets and ensure your financial well-being.
If you want to protect your legacy, or have questions about asset protection and estate planning, contact Sverdlov Law at 212-709-8112. We are here to help you navigate these important decisions.