Joint Tenancy Not Great For Asset Protection

Holding property as joint tenants has numerous advantages.  It can be convenient, and it can generally avoid probate of the jointly held assets.  It is a big misconception, however, that joint tenancy provides very much asset protection.

A recent Ohio Court of Appeals Decision, White v. Parks is a perfect illustration of the drawbacks of joint tenancy from an asset protection standpoint.  A creditor filed a judgment lien against Robert Parks.  When Mr. Parks failed to pay the judgment, the creditor filed a foreclosure action against his residence, naming both him and his wife (the co-owners), even though the judgment was only against Robert Parks and not his wife.  The trial court ruled that even though Mrs. Parks was not subject to the judgment, the residence nevertheless had to be sold.  Mrs. Parks was to get half of the net equity after the sale and the creditor would receive the other half.  The Ohio Court of Appeals, Ninth District, affirmed the ruling of the trial court.

From the Parks' standpoint it was a lot better that their house was in joint name than in Mr. Park's name alone.  The joint tenancy provided some protection.  However, even though title was held jointly, the couple was forced out of their house.  In addition, the creditor got one half of the net equity.  Not a great result for this couple.

Holding certain assets as joint tenants (such as a checking account with relatively limited funds) often makes great sense, simply for convenience.  Advantages of joint tenancy may out-weigh the disadvantages for certain parties.  When deciding whether to hold assets jointly, the assets cannot be looked at in isolation.  How best to title your assets will depend on a wide variety of factors, including your occupation, marital status, income, net worth, asset mix and many other considerations.  Titling an asset one way could be good for one purpose and not for another.  You should not assume, however, that jointly held property will provide great protection from any of your creditors.

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