Joint tenancy in Pennsylvania takes three basic forms:
The most uncommon form of joint tenancy today is Tenants-in-Common (often abbreviated as TEN COM). This form of joint tenancy states that each owner has an undivided interest in the property, which when he or she dies, will pass on to his or her heirs. TEN COM does not avoid probate. But, unlike joint tenants with rights of survivorship, the joint tenants can specify a percentage each owns (i.e. 60% and 40%). PA Inheritance tax is due on the death of the tenant and is based on the value of his or her percentage ownership. Creditors can reach your entire percentage interest.
The most common joint tenancy today is joint tenancy with rights of survivorship (often abbreviated as JTWS). JTWS states that each joint owner owns an undivided equal joint interest in the property. When one joint owner dies the remaining joint owner(s) get his or her share and pay PA Inheritance tax on it. The one who lives the longest gets the whole pie. This form of ownership avoids probate except in the case of the last owner to die. Creditors can reach the entire account if they can show that any one person could have withdrawn all the money at one time without the permission of the other owners.
If you are husband and wife and you own property together you own it as Joint Tenants by the Entireties (often abbreviated as JT ENT). It works the same way as JTWRS except that there can only be two owners, a legally married husband and wife. There is also an added special feature to this type of ownership. The debts of one spouse cannot be a lien on property that both spouses own together. If the spouse with all the debt dies first, the surviving spouse keeps all the JT ENT assets free and clear of liens.
Whenever you add a name to property so that there is more than one owner you are creating joint tenancy. How you establish the joint tenancy has a lot to determine if it is TEN COM, JTWS or JT ENT. As said earlier the presumption for husband and wife is JT ENT. But if you add the name of a son, daughter or some other third party to your asset, the tenancy is automatically converted to JTWRS. As soon as this happens you lose the protection you get from creditors and should a spouse die with debt, or your third party have financial difficulty, their problems are now your problems.
Another problem with TEN COM and JTWRS is that you lose some control over your asset. If you want to sell your stock, house or liquidate your bank account, you made need the signature of the other joint owners. If only one won't consent or cannot consent because of a physical infirmity, you cannot do what you want to do.
Finally, joint tenancy can interfere with your estate plan. Because JTWRS assets do not pass through your estate, the provisions of your will do not control how the assets are distributed. For example, you have a will that states all your assets upon your death go to your spouse, and if he dies first to your four children, share and share alike. Your husband dies, and as you get older, you add the name of your daughter to your bank accounts, because she lives close by and can help you with the day to day bill paying and so forth.