Joint ownership seems convenient, but it can be a legal minefield. Unfortunately, many people enter these arrangements without understanding the consequences. Once created, this legal relationship is difficult to sever without consent. Therefore, this article explores how people create joint ownership they can’t undo. This insight can help you avoid these binding financial traps.
1. Adding a Child to Your Bank Account
Many aging parents add a child as a co-owner on their bank account. They do this to get help paying bills. However, this instantly creates a “joint tenancy with right of survivorship.” As a result, the child has an equal right to all the money. You cannot then remove them without their permission. This common mistake exposes your life savings to the child’s creditors.
2. Putting Someone’s Name on a Property Deed
Adding someone’s name to a property deed creates co-ownership. People usually title this as “joint tenants” or “tenants in common.” To sell the property, however, you need the co-owner’s full cooperation. If they refuse, you may face a costly partition lawsuit. This clearly shows how you can create a joint ownership that is difficult to undo.
3. Co-Signing a Loan for a Car or Mortgage
When you co-sign a loan, you become an equal co-borrower. Your name is on the line, even if someone else primarily uses the item. In fact, the lender sees you as a joint owner of the debt. You cannot simply remove your name from that loan later. Consequently, this entanglement ties your credit to the other person’s habits.
4. Opening a Joint Credit Card Account
A joint credit card makes both parties liable for the full balance. This is true regardless of who made the purchases. For instance, you cannot remove your name after a breakup. To close the account, both owners must first agree to pay it off. This is how people get stuck with a mountain of shared debt.
5. Inheriting Property with Siblings
When parents leave a property to multiple children, they become co-owners. They are typically “tenants in common.” This means each sibling owns a share of the property. Therefore, no single sibling can sell it without everyone’s consent. This situation often leads to disagreements and requires legal intervention to resolve.
6. Starting a Business Partnership Informally
A handshake deal with a friend can create a legal general partnership. In such a partnership, all partners are liable for 100% of business debts. This is true regardless of your initial investment. Furthermore, extracting yourself is difficult without a formal dissolution agreement. This dangerous situation puts all of your personal assets at risk.
7. Adding a New Spouse to an Existing Asset
Adding a new spouse to your pre-owned home’s deed makes it marital property. Then, in a divorce, a court will likely consider the house a joint asset. The asset would then be subject to division. You cannot unilaterally remove their name later if the relationship sours. This emotional decision greatly complicates the separation of assets.
8. Listing Someone on a Stock or Brokerage Account
Listing a non-spouse as a joint owner on a brokerage account gives them rights. People often set this up as a JTWROS account. Consequently, the other person can make trades and withdrawals. You cannot remove them from the account without their signature. This move can disrupt your long-term investment and estate planning goals.
Navigating the Bonds of Co-Ownership
While sharing assets is a sign of trust, it carries legal weight. For instance, adding a name to a deed creates a binding relationship. This relationship is often difficult to dissolve. Therefore, you must understand the rights you are giving away. A power of attorney is often a better alternative since it grants authority without surrendering ownership.
Have you ever been stuck in a joint ownership situation that was difficult to get out of? Share your experience in the comments.
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The post 8 Ways You Accidentally Create a Joint Ownership You Can’t Undo appeared first on Budget and the Bees.
