What are ways to protect original intent of a Joint Tenancy when a change is needed?

Question

Three elderly Joint Tenants own and live in a home together. They divide all expenses equally. One of the Joint Tenants is struggling with medical bills. The other two Joint Tenants are willing to help financially. Enter a third party who is offering to buy out the interest of the Joint Tenant by paying off the medical bills plus cash. This will terminate the Joint Tenancy. What are possible ways the two Joint Tenants can insure the financially strapped Joint Tenant will abide by the original agreement? In other words, they want to be sure the property will eventually pass to them. What are some possible solutions to this dilemma?

James L. Arrasmith · Answer

There are a few potential ways the two joint tenants could approach this situation to try to preserve their original intent under California law: 
 
1. Loan Agreement: Instead of allowing a third party buyout, the two financially stable joint tenants could enter into a formal loan agreement to pay off the medical bills for the struggling joint tenant. The loan agreement could specify repayment terms and include a clause that failure to repay would result in forfeiture of the borrower's interest in the property to the lender joint tenants upon death. This would need to be carefully drafted by an attorney. 
 
2. Life Estate: The joint tenancy could be severed and the property deeded to grant the struggling joint tenant a "life estate" - the right to live in and use the property for the rest of their life. The remainder interest would be deeded to the other two joint tenants. This would allow the life tenant to potentially take out a loan or reverse mortgage on their own to pay bills, with the other joint tenants still guaranteed to inherit the property. 
 
3. Trust Arrangement: The title could be transferred into an irrevocable trust with all three as beneficiaries and one of the stable joint tenants as trustee. The trust could allow for payment of the struggling tenant's bills from the trust assets/property, while limiting their ability to sell or encumber their share and specifying the other tenants as remainder beneficiaries.  
 
4. Contract with Right of First Refusal: If a buyout is unavoidable, the joint tenants could enter into a contract specifying that if the struggling joint tenant decides to sell, the other joint tenants have the right of first refusal to match any third party offer and buy the share themselves.  
 
The optimal approach depends on the specific circumstances and goals. The joint tenants should consult with an estate planning attorney to evaluate options and properly document any arrangement. Solutions like loans, trusts and life estates can be complex and require careful drafting to be effective and avoid unintended consequences.

Delaram Keshvarian · Answer

Thank you for asking the question! 
 
The joint tenants (JT) are legally allowed to sell their property.  
There may be some ways to keep the property among the current JT.  
 
1. Life estate:  
Is a form of present interest in property that gives the right of use and enjoyment until the death of the life estate holder.  
 
Remainder:  
Is a form of future interest in the property that upon the death of previous holder will pass to the interest holders. 
 
The selling joint tenant (JT) can sell a "life estate" and make the other two JTs as "remainders". Probably in exchange of an consideration (payment) the non-selling JTs can purchase future interests in the property. 
 
2. The two other joint tenants can buy the share from the selling  JT. 
 
This is merely discussion of general laws and not a legal advice. For a comprehensive advise, more specific facts and investigation are needed. I recommend you consult with an attorney in more detail.

Q: What are ways to protect original intent of a Joint Tenancy when a change is needed?