What New Yorkers Need to Know About Joint Tenancy and Inheritance

Joint tenancy is a popular way for two or more people to co-own property in New York, like a home, business, or bank account. It comes with equal rights, shared responsibilities, and a unique feature called the "right of survivorship." But before diving in, it’s essential to understand the pros, cons, and tax implications.

What Is Joint Tenancy?

In a joint tenancy, all owners share equal ownership and financial obligations. The standout feature is the right of survivorship. This means when one owner passes away, their share automatically transfers to the surviving owner(s), no probate required.

Example: If you and a friend own a house as joint tenants and your friend passes away, you become the sole owner without needing court approval.

The Risks of Joint Tenancy

While avoiding probate is a big perk, joint tenancy has its downsides:

Debt Liability: Co-owners are equally responsible for each other's debts. For instance, if you co-own an account with someone who has creditors chasing them, your share could be at risk.

Court Involvement for Ownership Claims: Surviving owners may still need to prove their claim in court if disputes arise.

Do You Pay Inheritance Tax on Jointly Owned Property?

Yes, potentially. Under New York law, jointly owned property is often taxed as if it fully belonged to the deceased owner. This means inheritance taxes could apply based on the property’s total value at the time of death.

What Is the Step-Up in Basis Rule?

The step-up in basis rule is a tax-saving benefit for inherited property. Here’s how it works:

When you inherit property, its value is adjusted to its market value at the time of the owner’s death.

If you sell the property later, capital gains taxes are calculated based on this higher value, reducing your tax burden.

Example: If your parent bought a house for $100,000 and it’s worth $500,000 when they pass away, you inherit it at $500,000. If you sell it for $550,000 later, the gain is only $50,000 not $450,000!

Unfortunately, joint tenancy does NOT offer this benefit unless the property is inherited outright after all co-owners have passed.

Is Joint Tenancy Right for You?

Joint tenancy can be great for avoiding probate and ensuring smooth property transfers but comes with risks like debt liability and limited tax benefits.

If you're unsure whether joint tenancy is the best option for your situation or want to explore alternatives like tenancy in common and trusts, consult an experienced estate planning attorney.

Take Action Today!

Estate planning isn’t one-size-fits-all. Whether you're considering joint tenancy or other options to protect your assets and loved ones, getting professional advice is key.

About the Author

Leslie has been practicing law since 2009 and is the host of the estate planning podcast 'Legacy Purse'. She has a long history of representing family members struggling to inherit property and/or wealth from deceased family members through the Probate Courts. Knowing how time-consuming and expensive the probate process is, Leslie takes great pride in helping her clients learn how to plan and protect their families during their lives so they can avoid the probate court process and save their loved ones that additional grief (and expense).