In most situations, joint ownership is just not a good idea and we’ll discuss that below. But, first, we want to emphasize that joint ownership doesn’t really avoid probate.

Joint Ownership May Delay Probate, but it Doesn’t Avoid It

Joint ownership may delay probate, but it won’t avoid it.  Here’s an example:

Meghan and John put their assets in joint names to avoid probate.  John died and the assets to Meghan without probate.

A few years later, Meghan died.  Because the assets formerly owned jointly were now in Meghan’s individual name, probate was guaranteed.

If you think, “Well, that’s okay.  When one of us dies, the other can do good estate planning then and avoid probate” consider this example:

Ruth and Kirk put their assets in joint names to avoid probate. 

They were both killed in a car crash and all assets went through probate.            

Joint ownership only avoids probate if there is a surviving joint owner.  And, as we illustrate in the Meghan and John example, joint ownership only really delays probate.  There is no probate avoidance.

How to Avoid Probate

For many people, the best way to avoid probate is with a fully funded revocable living trust. The trust offers benefits and minimal real pitfalls; it does avoid probate for all assets that the trust owns. This is key. Your assets must be in the name of the trust to avoid probate.

If you own assets jointly, consult with a qualified estate planning attorney to determine the best way to completely avoid probate. Owning assets jointly won’t only often does not work.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

Most states allow you to own some kinds of property in joint tenancy, a legal form of ownership that allows more than one person to own the property at the same time. People who own property in joint tenancy may also have a right of survivorship, meaning that when one co-owner dies, the surviving co-owner inherits that person’s ownership interest. There are different kinds of property that can be owned as a joint tenancy, though you should talk to your attorney for state-specific information. 

Bank Accounts. Married couples often own a bank account as a joint tenancy. With bank accounts, each account holder has the right to use the account as he or she chooses, meaning both owners can deposit or withdraw money as they choose.

Real Estate. Many people, usually married couples, own their homes as joint tenants. In some states, however, married couples can only own real estate as tenants by the entirety, a form of ownership very similar to joint tenancy but with asset protection qualities.

Safe Deposit Boxes. Like bank accounts, you can own a safe deposit box as a joint tenancy. Like a bank account, both joint tenants have an equal right to use the safe deposit box. However, the property placed within that box is not necessarily held in joint tenancy, meaning that, for example, a spouse cannot use the individually owned property in the box that the other spouse—the owner—placed within it.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

You can determine how your assets are owned by looking at the title of the accounts on financial statements or the title of real estate on the deed.  Proper asset ownership is imperative to an estate plan that works.  If you don’t own your assets correctly, your estate plan won’t work.

If you have a revocable living trust, proper asset ownership includes funding your trust.  For most assets, this means transferring the title of assets to the name of your trust.  For beneficiary designation assets, this means changing the name of the beneficiary to the title of your trust.

A living trust title looks something like this, though it can be abbreviated:

Kimberly and Michael Jones, Trustees, or their successors in trust, under the Kimberly and Michael Jones Living Trust, dated October 23, 2011.  This is a joint trust for married persons. 

A separate for a married person would look like this:

Kimberly and Michael Jones, Trustees, or their successors in trust, under the Kimberly Jones Living Trust, dated October 23, 2011.

An individual trust for a single person or a person who is in a blended family and does not name a spouse as co-trustee would look like this:

Kimberly Jones, Trustee, or her successors in trust, under the Kimberly Jones Living Trust, dated October 23, 2011.

Important Points to Remember

• Your living trust only controls assets in the name of your living trust.
• Your will only controls assets in your individual name, that don’t have a beneficiary designation.
• You cannot control jointly owned assets (joint tenants with right of survivorship), unless you change the form of ownership
• Your will and trust do not control life insurance, retirement assets, or annuities made payable to an individual.
• Your will doesn’t control your house or financial accounts if you own them jointly with a spouse, child, or other individual.

To best ensure that your estate plan works, you must own your assets properly.  Consult with a qualified estate planning attorney to determine the best way for you to own your assets.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

Many people hope to avoid the process of probate when creating their estate plan.  This is because probate can be extremely expensive and can take a lot of time and effort.  In addition, it can take a long time for beneficiaries to receive assets.  If you’re looking for a way to make sure that your beneficiaries receive your assets more quickly after your death, take a look at some of the information below.  If you have any questions, or if you’d like to discuss probate avoidance techniques, meet with an estate planning attorney.

• Consider joint ownership.  If it’s appropriate for you, you can jointly own some of your assets with a loved one.  Once one of you dies, the other person has full ownership of the assets.  It’s important to carefully consider this option because the other person will have complete control over your jointly owned assets and your ownership interest is subject to seizure by your joint owner’s creditors.
• Make sure that your beneficiary designations are current.  Certain assets such as pension plans, life insurance policies, and retirement accounts pass directly to beneficiaries after your death, avoiding probate.  You will need to review your designations so that the right people are getting your assets.  Your loved ones will be able to get these assets quickly after your death.
• Consider creating a revocable living trust.  With this trust, you can title your assets in the name of your trust.  After your death, your trust’s assets will be distributed based on the trust’s instructions, avoiding probate.  This means your loved ones can receive your assets more quickly than if you were distribute your assets via a will.  In addition, your affairs are kept private when you use a trust.
• Another option is to create a transfer on death or payable on death account.  This will allow you to pass your bank account assets to a beneficiary, that you have named, after your death.  You can discuss the rules associated with these accounts with your attorney or bank.

If you’re looking to avoid probate, there are steps that you can take to meet your wishes.  If you’re interested in implementing probate avoidance techniques, consult with a qualified estate planning attorney.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

Are you thinking about creating a jointly owned account?  Many people choose to make this financial move. While this is a popular option, it is important to consider both the pros and cons of joint account ownership before making this decision.  Take a look at the following considerations.

The Pros

• Many people choose to create a bank account that includes joint ownership because it is convenient to handle finances between two people.  Most married couples choose to create this type of account.  This is also thought to be a beneficial option for elderly individuals who allow family members to help make important financial decisions.
• All of the assets in a jointly owned bank account avoid the lengthy and expensive process of probate.  This makes it easier for assets to be distributed after death.  If you have a loved one who you want to your bank account assets to be given to after death, this can be a great option.

The Cons

• Whoever jointly owns the bank account with you will have full access to the account funds at all times.  If you jointly own an account with someone who is irresponsible or untrustworthy, you could quickly lose your hard earned money.
• Creditors can easily take the funds in your jointly owned bank account. Even if you are not responsible for the creating the debt, your hard earned money may be taken from you.
• If you have a jointly owned account, you may be ineligible for certain benefits such as Medicaid.  Even if you do not have a lot of income, the fact that you have a jointly owned account open with other funds may mean that your asset level is too high for certain government programs.

If you have questions about the benefits and dangers of jointly owned accounts, consult with a qualified estate planning attorney.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.

If your jointly owned property has caused you to loudly exclaim, “OH NO,” you haven’t owned it long enough yet.  But isn’t that they way most people, at least married couples, own their property?  Yes, it is.  But look what happens.  And then you decide whether you want to own property jointly.

Jointly owned property – Catastrophe #1

Fred and Wilma own most of their assets jointly:  house, bank accounts, and investment accounts.

Fred dies.

Wilma now owns everything in her individual name.

The result?

If Wilma is sued because she committed malpractice, caused a car accident, goes bankrupt, has a business failure, gets divorced, etc…..

All of the assets can be taken because they were inherited without any asset protection.  Joint ownership has a survivorship feature that causes the property to go outright to the surviving owner.

Jointly owned property – Catastrophe #2

What else?

Wilma hasn’t been sued (yet) but she gets remarried to Barney.  She always thought he was cute.  Blondes are more fun afterall.

Wilma and Barney put all of their assets in joint names because that’s what married couples do.

Wilma dies.

The result?

Barney, by operation of law, automatically inherits all of the jointly owned property.

When Barney dies, where do Fred and Wilma’s assets go?

To BamBam.

What does Pebbles get?  Nothing.

Many children are unintentionally disinherited by jointly owned property.

Jointly owned property – Catastrophe #3

Disinheritance also occurs unintentionally when siblings own a hunting cabin or family vacation home together.

The survivor takes all and the family of the first to die has no legal interest or right to the property.  The kicker is that the decedent’s family has to pay the taxes on the transfer of the family vacation home to the sibling but has no benefit of the asset.

Jointly owned property – Catastrophe #4

Some parents, especially elderly and recently widowed parents, put a child’s name on the house or other assets.  (Don’t ever do this.)

We’ll use the example of Jake the Snake and his mom.

Momma Snake puts Jake’s name on her house and bank account.  He’s the oldest.

What happens when Jake the Snake:

• Gets divorced?
• Goes bankrupt?
• Needs to qualify for Medical Assistance?
• Is sued for causing a car accident?
• Has a medical crisis?
• Is a jerk?
• Needs money?
• Commits malpractice?

You’re right.  Momma Snake likely loses her house and her bank account.

What happens when Momma Snake dies?

Jake, by operation of law, inherits the assets.  His siblings, Momma Snake’s other children, inherit none of the jointly owned property.

If you have questions about the big “OH NO” of jointly owned property, consult with a qualified estate planning attorney.

Duffy Law Office is a member of the American Academy of Estate Planning Attorneys.