Estate Planning Attorney in Laguna Hills, CA | Confidential Consultations
Estate Planning Attorney in Laguna Hills, CA | Confidential Consultations
When someone passes away, their assets including homes, bank accounts, and investments don’t automatically transfer to loved ones.
In California, if those assets are titled only in the deceased person’s name, they typically must go through probate, a court-supervised process that can be lengthy, expensive, and public.
Probate fees are calculated based on the gross value of the estate, not the equity.
For example, if you own a home worth $1 million with an $800,000 mortgage, probate fees are based on the full $1 million not the $200,000 in equity.
That means the total probate cost could easily exceed $46,000 or more, even for a modest home.
To avoid these costs, many Californians look for strategies that allow assets to pass directly to loved ones and joint ownership is one of the most common.
Joint ownership means two or more people share legal title to an asset such as a home, a checking account, or an investment portfolio.
When one owner dies, the surviving owner automatically becomes the full owner. This happens outside of probate, which can make joint ownership seem like a quick and easy solution.
Common types of joint ownership in California include:
At first glance, this seems like a simple way to avoid the courts and keep things moving smoothly but there are important risks to understand before you take this step.
When you add someone like your spouse, child, or trusted friend as a joint owner, they immediately become a co-owner of that asset.
That means when you pass away, the asset doesn’t go through probate. Instead, it transfers instantly to the surviving owner by operation of law.
This works for:
If you and your spouse own your home as “joint tenants with right of survivorship,” and you pass away first, your spouse automatically becomes the full owner of the home. No court process. No probate. No delay.
It sounds ideal and in some situations, it can be. But as with many “simple” solutions, there are hidden pitfalls that can create problems down the road.
Adding someone to your account or home title might feel like a shortcut to avoid probate but it can cause serious unintended consequences.
Let’s break down the main risks you should consider.
When you make someone a joint owner, you’re not just naming a future beneficiary. You’re giving them legal rights right now.
That means they can:
If you add an adult child or friend as a joint owner “just to make things easier,” they immediately gain access and ownership rights equal to yours.
Even if they never act irresponsibly, you lose sole control over that asset.
When someone is a joint owner, their share of the asset becomes part of their own property which means their creditors can come after it.
If your joint owner:
…that property could be at risk.
For example, if your adult child is on your home title as a joint owner and they’re sued in an unrelated matter, their creditor could place a lien on your home.
This is one of the biggest hidden dangers of joint ownership.
When you die and your heir inherits your property through a living trust, they receive a “step-up in basis” meaning the property’s tax basis adjusts to its current market value.
That can significantly reduce or even eliminate capital gains taxes if they sell the property later.
However, if you add someone as a joint owner during your lifetime, they don’t receive that step-up on your portion when you pass away.
That means they could owe much higher capital gains taxes when selling the property later.
If you bought your home for $300,000 and it’s now worth $1,000,000, the person you added as a joint owner may face taxes on that $700,000 increase rather than receiving a full tax adjustment like they would with a trust.
Reference: IRS Capital Gains and Basis Rules
Joint ownership can also create inheritance problems.
If you add one child to your bank account “to make things easier,” that child becomes the full owner when you pass away and they’re not legally required to share it with their siblings.
Even if they promise to, there’s no legal obligation.
This often leads to family disputes, unequal inheritances, and resentment that could have been avoided with a clear, legally structured estate plan.
With joint ownership, there’s no contingency if both owners pass away together.
If a husband and wife own their home jointly and die in an accident, the property still goes through probate for the next generation.
A properly designed living trust avoids that issue entirely by naming backup beneficiaries and successor trustees to manage the estate automatically.
Despite its risks, joint ownership isn’t always a bad idea. It can work well when:
But for most families especially those with real estate or multiple heirs it’s rarely the best long-term solution.
A revocable living trust gives you all the same benefits of avoiding probate, without the risks and complications that come with joint ownership.
Learn more: How a Living Trust Protects Your Family and Avoids Probate
A revocable living trust allows you to keep full control of your assets while you’re alive and ensure they pass smoothly to your chosen beneficiaries without probate.
With a trust, you can:
And unlike joint ownership, a trust includes clear backup instructions so your plan works even if multiple people pass away or become incapacitated at the same time.
While joint ownership might seem like a simple way to avoid probate, it often creates bigger problems later.
The best approach depends on your goals, assets, and family situation. Before making changes to property titles or account ownership, it’s wise to speak with a qualified estate planning attorney who can help you choose the strategy that protects both you and your loved ones.
At Pevney Estate Planning, we help California families design estate plans that avoid probate, minimize taxes, and ensure peace of mind.
Schedule your free 30-minute consultation today or call (949) 377-2996 with Michael Pevney, your trusted Orange County estate planning attorney.
