You may hear about different ways that assets can be transferred after you pass away. If you do not know much about the intricacies of estate planning, they can sound like great ideas.
That being said, you should really know the facts so that you can make truly informed decisions. Some of the so-called “simple solutions” are not that simple in the long run.
Joint Tenancy With Right of Survivorship
If you own a home, you can add a co-owner to the title or deed of the property. This arrangement is called joint tenancy, and it comes with right of survivorship. After the death of one joint tenant, the surviving joint tenant would assume total ownership of the property.
A house or account owned in joint tenancy would not be subject to the probate process as it would if you left the home to the other individual in a last will. Probate is not inherently negative, but it can be time-consuming, and inheritances are delayed while it is underway.
A piece of property that is transferred through joint tenancy would not have to pass through probate, and this is one of the positives that people often tout. On the other side of the coin, there are some very good reasons why you may want to think twice before you embrace joint tenancy.
When you go this route, you are giving half ownership of the property to the joint tenant immediately. As a result, let’s say that the person that you add runs into some trouble with the IRS. If a tax lien is imposed on any property that is owned by the joint tenant, guess what? Half of your home would no longer belong to you, and it would be in play.
The same thing is true of a divorce or some other type of legal action that can result in property attachment. You would also have to get the joint tenant to cooperate if you want to sell the home, and they would have the ability to leverage their share in any way that they choose.
There is no reason to take all of these risks when there are completely safe ways to facilitate the transfer outside of probate if this is something that really matters to you.
Payable on Death Accounts
Another one of these bright ideas that can backfire is the notion that you can use a payable on death bank account as the foundation of your estate plan. With a payable on death or transfer on death account, you name a beneficiary who would inherit the assets in the account after your death.
One of the drawbacks is the fact that you may be able to add multiple beneficiaries, but the institutions typically require equal distributions among them. This may not be consistent with your wishes so why should you let their rules impact your estate distribution preferences?
You could decide to keep things simple and leave everything in the account to a single beneficiary and tell the beneficiary to distribute the assets among multiple different people. The beneficiary may not follow these verbal instructions after your passing, and folks can sometimes get their own ideas about what is really fair.
Once again, solid estate planning strategies exist so you should certainly discuss your objectives with an attorney from our firm to make sure that your wishes are carried out.
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John’s practice focuses on the use of Wills and Living Trusts in Estate Planning to help individuals protect their families and preserve their legacies after their deaths, but his practice also focuses on the critical issues of protecting individuals with dementia or other diminished capacity, assisting individuals in qualifying for Medicaid and other government benefits to offset the costs of long-term care, and providing special needs planning.
John is admitted to practice law in North Carolina, South Carolina, Kentucky, and Ohio, and he is accredited by the Department of Veterans Affairs.
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