Joint Tenancy in Maryland: How It Avoids Probate and When It Backfires

Adding a child's name to a bank account or property deed is one of the most common estate planning shortcuts Maryland families attempt. The logic is simple: when the owner dies, the asset passes automatically to the surviving joint tenant without going through probate.

It works — until it doesn't. Joint tenancy creates as many problems as it solves, and understanding the mechanics under Maryland law is critical before you retitle anything.

How Joint Tenancy Works

Joint tenancy with right of survivorship means two or more people own an asset together, and when one owner dies, the surviving owner(s) automatically inherit the deceased owner's share. No probate, no court involvement, no waiting period.

Maryland recognizes several forms of joint ownership:

Joint tenants with right of survivorship (JTWROS): Each owner has an equal, undivided interest. When one dies, the survivors take the deceased owner's share automatically.

Tenants by the entirety: A special form of joint ownership available only to married couples. Both spouses own the entire property. Neither can sell, mortgage, or transfer without the other's consent. The surviving spouse inherits automatically.

Tenants in common: Each owner has a distinct share that does NOT pass to the other owner at death. Instead, each share goes through the deceased owner's probate estate. This is the default in Maryland when the deed doesn't specify a different form of ownership.

The Probate Avoidance Advantage

Assets held in joint tenancy with right of survivorship or tenancy by the entirety pass outside of probate entirely. They're classified as "non-probate assets" under Maryland law, meaning:

• The surviving owner receives the asset immediately upon the other owner's death
• No filing with the Register of Wills is required
• No probate fees are assessed on the asset's value
• No creditor claims period delays access to the asset
• The asset is not subject to the personal representative's management or the Orphans' Court's oversight

For married couples, tenancy by the entirety provides an additional layer of protection: creditors of only one spouse generally cannot attach the jointly owned property.

The Risks Most Families Don't Consider

Gift Tax Exposure

When you add a non-spouse to a bank account or property deed, you've made a gift for federal tax purposes. If the value of the gift exceeds the annual exclusion ($19,000 per recipient in 2026), a gift tax return (Form 709) must be filed. For real property worth hundreds of thousands of dollars, this can create significant reporting obligations and potentially reduce your lifetime estate tax exemption.

Loss of the Stepped-Up Basis

This is the most expensive mistake families make with joint tenancy. When property passes through a decedent's estate (via probate or a trust), the heir receives a "stepped-up" cost basis equal to the property's fair market value at the date of death. This eliminates capital gains tax on all appreciation during the owner's lifetime.

With joint tenancy, only the deceased owner's share receives the step-up. If a parent adds a child as a 50% joint tenant on a home purchased for $200,000 that's now worth $500,000, the child's half retains the original $100,000 basis. Selling the home after the parent's death triggers capital gains tax on the child's $150,000 of unrealized appreciation — a tax that wouldn't exist if the property had passed through the estate.

Medicaid Eligibility Problems

Adding a child as a joint owner of a bank account or property doesn't remove the asset from Medicaid's countable resource calculation. Maryland Medicaid considers the parent's share of jointly held assets as available resources for eligibility purposes.

Worse, if the parent later needs nursing home care and applies for Medicaid, adding the child's name to the deed within the past 60 months may be treated as a transfer for less than fair market value — triggering a penalty period during which Medicaid refuses to pay for care.

Creditor and Divorce Exposure

Once you add someone as a joint owner, their creditors may be able to reach the asset. If your adult child goes through a divorce, bankruptcy, or lawsuit, the jointly held property could be at risk.

In Maryland, a judgment creditor of one joint tenant can petition the court to sever the joint tenancy and force a sale of the debtor's share.

Unintended Inheritance Outcomes

Joint tenancy overrides your will. If your will says "divide my estate equally among my three children" but you added only one child to your bank accounts as a joint tenant, that child gets all the joint accounts — regardless of what the will says. The other two children receive nothing from those assets.

Safer Alternatives

Transfer-on-death (TOD) designations: Maryland allows TOD registrations on bank accounts and investment accounts. The asset passes to the named beneficiary at death without probate, but the owner retains full control and can change the beneficiary at any time. No gift tax issues, full stepped-up basis for the beneficiary.

Pay-on-death (POD) accounts: Similar to TOD but specifically for bank and credit union accounts. The beneficiary has no access or ownership interest during the account holder's lifetime.

Revocable living trust: Assets transferred into a trust avoid probate and remain under the grantor's control during their lifetime. The trust terms control distribution, and beneficiaries receive a full stepped-up basis.

Life estate deed: The owner retains the right to live in the property during their lifetime, and it passes to the remainder beneficiary at death outside of probate. After five years, it's also protected from Medicaid estate recovery.

Using a POA to Manage Joint Assets

If you already hold assets in joint tenancy, your power of attorney agent's authority over those assets depends on the POA's specific language. A general financial POA typically authorizes the agent to manage the principal's interest in jointly held accounts, but restructuring ownership — adding or removing names — requires explicit authorization in the Special Instructions.

Before making any changes to how assets are titled, understand the tax, Medicaid, and inheritance implications.

The Maryland Power of Attorney Kit covers asset titling strategies alongside the full POA suite, including guidance on probate avoidance methods that don't carry joint tenancy's hidden risks.

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