There are all sorts of acronyms in professional language. Some are common enough that the average person is familiar, but some are virtually unheard of. If you haven’t heard of JTWROS, rest assured that you aren’t alone. It stands for “joint tenants with rights of survivorship,” and the term is used in estate planning for couples. It’s also frequently used in the business world among partners.
JTWROS, or Joint Tenants with Rights of Survivorship, at its most basic level, is a form of asset ownership. The asset in question, usually some type of financial account, is owned by two or more people. Each owner of the asset has equal rights to the account and is given survivorship rights. In other words, if one account owner passes away, the other owner(s) are given rights to the money, or property, contained therein.
In many cases, joint tenancy is a wise option. In others, it isn’t the best idea. There are some things about JTWROS you should consider before you enter into this type of agreement.
If you have questions about your JTWROS or your estate plan in general, contact a New Jersey estate planning lawyer today by calling 609.580.1044 or by contacting us online to schedule a no-risk consultation.
JTWROS Has Its Advantages
There are pros and cons to any decision you make. A JTWROS agreement has several advantages that make it worth taking a closer look. Here are three of the most important ones to make note of:
1. Avoiding Probate
Even with a will in place, your assets will be scrutinized by the probate court. The court will look to make sure that the document is valid and legally binding. The court will also determine what assets have been left behind and what liabilities need to be taken care of.
Once any outstanding and necessary debts are settled by the executor, assets will be distributed as outlined in the will. If there is no will in place, New Jersey law will determine how the assets of the decedent are distributed according to the laws of intestate succession.
Probate can be a lengthy process that most people want to avoid. Consider that the court process can take anywhere from weeks to years, and beneficiaries do not receive their inheritance until the court has made their final decision.
With a JTWROS in place, there is no probate. Because this is a legally binding document, the spouse (or business partner) automatically retains ownership of the asset upon the death of the first owner. It’s a much quicker process and allows someone to maintain control over an asset without interruption.
2. Equal Responsibility
When an asset is titled JTWROS, each spouse or business partner has equal ownership. This is wise because it allows all parties to share the benefits equally. It also means that neither partner can take on debt for an account or venture without taking it on personally.
Imagine that your spouse suddenly passes away, and you discover that your assets are frozen. Paying the bills could become extremely difficult. What if your business partner dies and you still have a company to run?
When a person passes away in New Jersey, the assets held in their estate are typically frozen until the probate process can take place. When assets are owned jointly, there is no freezing of those assets. These assets are immediately transferred to the ownership of the survivor(s). This can be important in ensuring that debts in good standing and expenses continue to be handled appropriately.
The Disadvantages of JTWROS
While there are several benefits to JTWROS, there are disadvantages to be taken into consideration before entering this type of legal agreement. Let’s discuss a few of the drawbacks.
1. Relationships Can Deteriorate
No one enters a marriage thinking it will end in divorce. Business partners don’t start companies with the thought of a falling out. Unfortunately, these things happen. When they do, the JTWROS of an asset cannot be eliminated. If one party wants to sell or encumber the asset, they must obtain the consent of the other.
2. Frozen Bank Accounts
Do not make the mistake of believing that you are automatically in the clear with JTWROS. The probate court with jurisdiction may still freeze the account if they believe that it could be liquidated in avoidance of paying obligations. The court may also choose to freeze an account if there is a question as to whether it was merely a convenience or if the surviving partner actually contributed. It doesn’t happen often, but it can happen.
3. Asset Control
Trust is an issue in any relationship, for better or worse. When one enters into a JTWROS, they must have faith that the other partner will behave in an acceptable manner upon their death. Once ownership is retained by the surviving partner, they are able to control the asset how they wish — they may sell it or bequeath it to someone else at their discretion. If this is something you have concerns about, a JTWROS legal agreement may not be in your best interest.
You Have Options
Rather than JTWROS, some couples choose "tenancy in common." There is more freedom in this type of agreement. Here’s how it works:
Rather than complete ownership of the asset, anyone signing into the agreement controls half (or another percentage or fraction) that is essentially theirs to do with what they feel is necessary. Each party entering into the agreement can sell his or her share without consent from the other party.
Upon the death of one partner, the asset share is passed on to the heirs or in accordance with provisions made in the decedent’s will. The asset does not automatically pass on to the partner. Because each party controls its own portion of the asset, the surviving party maintains access to their percentage even when the other party passes away. There is no need to wait on a ruling from the probate court.
Talk to an Estate Planning Attorney to Plan Ahead
A JTWROS agreement may be in everyone's best interests when it is formed, but your feelings may now have changed. You may also want to keep a JTWROS in place but prepare in advance for what it might mean for your estate plan.
In any case, it is best to continually revisit your estate plan and make sure everything is arranged according to your intentions as of this moment. Van Dyck Law would be happy to assist you in reviewing your current plans and making adjustments as needed. Reach out to an experienced estate planning lawyer in New Jersey for a risk-free appointment when you call 609.580.1044 or contact us online.