Joint tenancy is one of several ways you can co-own real estate. The full name is "joint tenancy with right of survivorship," because when one owner dies, the surviving owner or owners inherit that owner's share. The right of survivorship trumps a will. Even if your will gives everything to your children, your co-tenant still inherits the real estate.
If you want your children to inherit your house, your vacation home or a second property, you can use a joint tenancy as part of your estate plan. Transfer your title to yourself and your child, or to several children, if applicable. At your death, the child inherits your ownership share, bypassing probate. One drawback is that the child co-owns the property while you're still alive. If he decides to sell his share, legally you can't stop him.
If you own real estate in joint tenancy with someone other than your child, you can still give your share to your child. Joint tenancies don't bind you for life; you can sell your share of the property or give it away if you wish. This doesn't pass on the right of survivorship, though. If you give your share to your child, he and the other owner become tenants in common. Neither person has any right of survivorship -- the property passes according to their wills instead.
The Gift Tax Factor
When you give your children your share of a joint property, or you make them joint tenants with you, you may have to pay gift tax. If you give one person more than $14,000 in a year -- as of 2014 -- you usually file a gift-tax return with the IRS. That applies to non-cash gifts, such as ownership of real estate. Over the course of your lifetime, you can exclude more than $5 million in gifts from tax. This reduces the maximum amount you can exclude from estate tax, though.
Writing in the "Chicago Tribune," attorney Benny Kass says sometimes joint tenants with right of survivorship may agree that if one of them dies, property passes to their children rather than each other. Unfortunately, saying so doesn't change the law. The real estate still passes to the other joint owner. If all the owners agree, they can change the title to a tenancy in common. Then each owner can give his share to anyone he chooses.