Many people, especially married couples, hold real estate, securities, and other assets as “joint tenants with right of survivorship” (JTWROS). With this arrangement, if one co-owner dies, the other co-owner automatically inherits the property.
Advantages: Property owned as JTWROS avoids the time and expense of probate. This is a simple, inexpensive way to keep property from the probate process. Moreover, one co-owner can handle the asset if the other is incapacitated. Also, adding a younger person—such as an adult child—as joint owner can make it easier to handle investments, write checks to pay bills, and so on, especially if the older owner becomes unable to manage his or her finances.
Drawbacks: Using JTWROS limits your flexibility. If you hold all of your assets with your spouse, they’ll all be inherited by your spouse. Nothing can pass to your other heirs, such as your children, no matter what you say in your will. Thus, you should use JTWROS only for assets that you absolutely want your co-owner to inherit.
Depending on the size of the estate, at the surviving spouse’s death significant taxes may be due that could have been avoided if the first spouse to die had left some assets to their children.
If you decide to go that route, be sure that a joint owner is someone you trust to handle your money properly in the case of incapacity. One option is to name a joint owner only for a checking account where modest amounts are kept, so bills can be paid if necessary in the case of incapacity but losses due to mismanagement would be minimized and there would be little impact on your plans for distribution of your assets on your death.