Joint Tenancy with Rights of Survivorship, commonly call JTROS, is considered a “will substitute.” When you own property in JTROS, you own an undivided equal interest in the property with the other joint tenant(s). If an owner dies, the property passes to the surviving owner(s), without going through the deceased’s probate estate.

Many people use JTROS ownership to keep property out of the slow and often costly probate process. When a JTROS property owner dies, the remaining owner(s) has immediate access to the property and can use it or sell it at his/her discretion. The ability to avoid probate and to provide your surviving spouse with immediate access to the JTROS property makes this a very popular form of ownership between spouses.

Some of the risks associated with JTROS ownership are estate planning risks. Since the JTROS property passes outside of the deceased’s estate, it cannot be used to fund a “Bypass Trust” or any other type of estate planning device. If the JTROS property is owned by a married couple, ½ of the value of the property is included in the deceased spouse’s estate. If the other owner is not a spouse, the full value of the property is included in the deceased’s estate, unless the other owner(s) can prove that they contributed to the purchase of the property.

Other risks, associated with JTROS property, come from the fact that the owners have an “undivided equal interest” in the property. As described in detail in Financial Abundance Guide, this type of ownership can lead to unintended consequences. A lien can be placed on the property by one of the owners, without your knowledge. The property can also be sold and all of the funds taken by one of the JTROS owners, even your spouse. Finally, since JTROS property passes outside of probate, any disposition of the JTROS property that is included in your will is ignored.

Own property with your spouse in “tenancy by the entirety” instead of JTROS, If your state provides for this type of ownership. With “tenancy by the entirety,” you and your spouse must jointly consent before the property can be sold or gifted.

There are many situations where joint tenancy with rights of survivorship may be the best form of property ownership. However, it is important to understand the risks associated with using JTROS property ownership as a “cure all” for estate planning.