Since a lot of people put estate planning on the back burner when they know that they should take action, they are all too quick to embrace “simple solutions” that they hear about from others.
On the surface, these approaches can make perfect sense, but there can be some negative outcomes lurking underneath. Let’s look at one of these overly simplistic plans that can go awry.
Joint Tenancy With Right of Survivorship
The first part of this scheme would involve the utilization of joint tenancy. This is simply the act of adding someone else to the title or deed of your home. It comes with right of survivorship, so after the death of one joint tenant, the other one would assume sole ownership.
If you are wondering why anyone would do this when they could just leave the home to someone in a will, it is because of the desire to avoid probate. This is a legal process that enters the picture when a last will is used.
It takes about eight months to a year in most cases, and the inheritors do not receive their bequests while this process is underway. This is one of the drawbacks, but there are others.
The thing about joint tenancy that is very shaky is the fact that the person that you add to the ownership document would in fact own half of the property right away. As a result, if this person was to get divorced, that portion of the property would be on the table.
This would also be true if the joint tenant was to run into tax or legal troubles. Plus, you would not be able to sell the home unless the joint tenant was on board, and they would be entitled to half of the proceeds.
There are other ways to facilitate the transfer of real property outside of probate. One course of action would be to convey the home into a revocable living trust. Assets in the trust could be distributed to the beneficiary or beneficiaries outside of probate.
This is one benefit, but there are multiple other good reasons why a trust can be the ideal centerpiece for an estate plan.
Payable on Death Accounts
The other part of an ill-conceived plan could be the utilization of a payable on death account. These accounts are alternately referred to as transfer on death accounts or Totten trusts.
Banks and brokerages will typically allow you to add a beneficiary to your account. If you do this, it would become a payable on death account. After you die, the beneficiary would obtain the death certificate and present it to the financial institution.
As long as everything is in order, the funds would be transferred to the beneficiary, and the probate court would not be involved.
Once again, this can sound simple enough, but there are some limitations and drawbacks to consider. One of them is the fact that you may be able to add multiple beneficiaries, but you would probably be required to allow for equal distributions between them.
This may not be consistent with your true wishes, and there is also the matter of verbal instructions not being followed. A person may open one of these accounts and tell a single beneficiary to distribute the resources among multiple people. The beneficiary would not be legally required to follow these instructions.
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There’s no reason to settle for a patchwork approach when you can work with a licensed estate planning attorney to create a custom crafted plan. Our doors are open, and you can request a consultation appointment right now if you call us at 513-721-1513. If you would rather send us a message, simply fill out the contact form on this website.