by Robert Mansour
Let me preface this by reminding readers that I am NOT a CPA or any sort of accountant. That being said, sometimes people don't realize that one of the problems of adding a joint tenant to an asset is you might be unwittingly gifting them your cost basis in the asset. That means when the joint owner wants to sell the asset in the future, they might have to pay much higher taxes than they otherwise would have if they had simply inherited the property. For example, let's say you bought a home many years ago for $100,000. Then you add a child to title as a joint tenant. Your reasoning might have been that you want the child to get the house when you die. That will indeed happen because the last surviving tenant gets the asset. However, let's assume the child sells the house for $600,000 when you die. The child has to pay taxes on the gain from $100,000 to $600,000 - all because they absorbed your cost basis in the property when you added them as a joint tenant. It would have been better to inherit the house in many cases. This is true with other assets subject to a cost basis like investment accounts. There are occasions when adding a joint tenant makes sense, but you've got to run the scenarios by a CPA and lawyer. You can't just do it because all your friends say it's a good idea. Your friends could be wrong. Also, there are other bigger dangers to consider when adding people as joint owners to assets.