What Happens With Joint Property?

Virtually every estate administration case we handle joint property, or “joint tenancy” as it is sometimes called.  This is most commonly true when the decedent was married, but often occurs when a deceased parent included a child on their bank account or a friend so that “money is available” when something happens to them.  But, joint property can have unintended consequences to your estate, so it is important to understand the different types of joint property according to a recent article titled “Everything you need to know about jointly owned property and wills” from TBR News Media.

This becomes an important issue because depending on the type of joint tenancy, your Will may or may not be necessary to convey it to your beneficiaries. It is also true that using certain types of joint tenancy may bypass your intended estate plan or have tax, government benefits and other consequences, so it is critical to understand the differences and to ensure the type of joint tenancy you are using matches your plan.

Joint Tenancy with Rights of Survivorship. Joint tenancy with rights of survivorship means that there are multiple owners and that upon the death of one, the other owners automatically become the owner of the account.  This process happens by virtue of the titling, and doesn’t require probate to make it happen.  Usually, a death certificate is sufficient to remove the deceased owner.

Most people assume when they see two owners on a bank account that it is owned as joint tenants with rights of survivorship.  In truth, this is something that you elect when you create the account or add a name, and many times bank personnel elects this without discussing it with you.  The best way to determine if your account has rights of survivorship is to check with account card at the bank, although some statements or accounts will also say “JTWROS.”  That is short for “Joint Tenants with Rights of Survivorship”.

Tenancy by the Entirety. This type of joint ownership is only available between spouses and is not used in all states. It definitely exists in Pennsylvania, and is the default way of taking title to real property that is purchased during marriage.  A local estate planning attorney will be able to tell you if you have this option. As with Joint Tenancy with Rights of Survivorship, when the first spouse passes, their interest automatically passes to the surviving spouse outside of probate.

There are additional protections in Tenancy by the Entirety making it an attractive means of ownership. One spouse may not mortgage or sell the property without the consent of the other spouse, and the creditor of one spouse can’t place a lien or enforce a judgment against property held as tenants by the entirety.

Tenancy in Common. This form of ownership has no right of survivorship and each owner’s share of the property passes to their chosen beneficiary upon the owner’s death. Tenants in Common may have unequal interests in the property, and when one owner dies, their beneficiaries will inherit their share and become co-owners with other Tenants.

The Tenant in Common share passes the persons designated according to their will, assuming they have one. This means the decedent’s executor must “probate” the will for the executor to have control of it. Sometimes this is very critical to leave assets as Tenants in Common because you want your portion of an asset to go to a trust or not to the other owner.

In all of these, it is important to recognize that joint tenants are not always necessary.  First, adding a co-owner could affect your estate plan, as is generally described above.  Also, adding a person is a gift, which may have adverse effects on your beneficiary if they suffer a disability, and has gift tax consequences to yourself.  It may also subject “your” money to the creditors of the new owner.

For those who only want “check writing authority,” it actually is possible in Texas to get authority to sign checks only without being an owner, although most banks encourage joint ownership as it is less risky to them.

All in all, it is important to makes sure that the ownership and titling of your assets fits with your estate plan.  A comprehensive estate plan, created by an experienced estate planning attorney, ensures that both probate and non-probate assets work together.

Reference: TBR News Media (Dec. 27, 2022) “Everything you need to know about jointly owned property and wills”

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The Basics of Estate Planning

Every now and again, it’s helpful to go back to the basics.  This blog will go back to the basics of estate planning to talk about how and why everyone should have an estate plan.  Forbes’ recent article entitled “Estate Planning Basics” explains that everybody has an estate.

No matter how BIG or small your net worth is, estate planning is a process that addresses how and to whom you leave your assets when you die and names decisionmakers who will wind-up your affairs at death and make financial, medical or personal decisions for you if you cannot yourself.

An estate is nothing more or less than the sum total of your assets and possessions of value. This includes:

  • Your car
  • Your home
  • Financial accounts
  • Investments; and
  • Personal property.

Part of estate planning is deciding which people or organizations are to get your possessions or assets after you’ve died.  This includes determining how to give it to them, and that plan addresses concerns such as marital status of the beneficiary, how they are with money, addiction problems, taxes and so on.

It’s also how you leave directions for managing your care and assets if you are incapacitated and unable to make financial or medical decisions. That is done with powers of attorney, a healthcare directive and a living will.

This is a very important aspect of estate planning, and you can learn more here:  https://galligan-law.com/power-of-attorney-why-it-is-important/

One of the biggest reasons people don’t have an estate plan is they assume they have no “estate” to be concerned with.  It might be true they don’t have much money, but everyone should consider naming individuals to act for them if they become incapacitated, ill or otherwise need help making decisions.

It also designates who can make critical healthcare and financial decisions on your behalf should you become incapacitated. If you have minor children, your estate plan also lets you designate their legal guardians, in case you die before they reach 18. It also allows you to name adults to safeguard their financial interests.

You can also create a trust to safeguard a minor child’s assets until they reach a certain age. You can also keep assets out of probate. That way, your beneficiaries can easily access things like your home or bank accounts.

All estate plans should include documents that cover three main areas: asset transfer, medical needs and financial decisions. Ask an experienced estate planning attorney to help you create your estate plan covering these three basic areas.

Reference: Forbes (Nov. 16, 2022) “Estate Planning Basics”

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Is Spouse Automatically Your Beneficiary?

People make a grave error when they don’t have an estate plan because they think their surviving spouse is their automatic beneficiary.  The laws of intestacy work differently, as explained in a recent article “Estate Planning: The spouse doesn’t always get everything” from nwi.com.

The surviving spouse doesn’t always receive everything under the intestate laws. This often comes as a surprise to people. In estate administrations without a will, I’m often told the decedent didn’t have a will because “it all goes to the wife anyway” or sometimes even “it all goes to the kids” (but that’s a different blog).

In many states, one half of the decedent’s estate assets are distributed to the spouse and the other half are distributed to the decedent’s child or children.  Similarly, many states have provisions where some property is divided between spouse and decedent’s parents if there are no kids.

To make this a bit more complicated, Texas has community and separate property.  Community property is marital property, and separate property comes from outside of the marriage, such as inheritance from that spouse’s family, a gift or something they distinctly brought to the marriage such as their home.  Separate property is treated differently in intestacy.

If a married couple lives in the separate property residence of a spouse who then dies, the surviving spouse gets a life estate in 1/3 of the property and the children take the rest.  It basically means the spouse stays in the house, but the house ultimately goes to the kids.  This essentially creates a division in which the spouse is expected to pay for some expenses, and the children for the rest.  It tends to be an unhealthy dynamic, to say the least.

Bear in mind the intestate laws only apply to assets in an estate administration.   Assets that pass by contract, such as life insurance to a named beneficiary or an account titled as joint tenants with rights of survivorship pass to those individuals.  This solves part of the property, such as bank accounts, but won’t solve the problem for everything.

I should note too that many people assume everything goes to the spouse because that’s what most people choose in their estate plans.  Practically things do go to spouse, but it required the estate plan to make it happen.  People see the common result and make an assumption on the process.

If you’d prefer to leave more to your spouse, you need a will. Intestacy literally translates to dying without a will. If you have a will and then die, you haven’t died intestate, and the provisions don’t apply.

The key in estate planning is to recognize you have a choice.  If you want everything to go to your spouse, don’t assume it’ll happen. Make it happen in your estate plan.

As one final aside, people also assume spouses can act for them if they are incapacitated.  That also isn’t automatically true and may require guardianship if estate planning doesn’t address it, although a power of attorney may avoid that need.  See here for more:  https://galligan-law.com/do-you-need-power-of-attorney-if-you-have-a-joint-account/

Each state has its own laws of intestacy, so an estate planning attorney who practices in your state needs to be contacted to determine what would happen to your spouse if you didn’t have a will. Your best recommendation is to meet with an experienced estate planning attorney and create a plan to protect your spouse, your children or your chosen beneficiaries.

Reference: nwi.com (Oct. 23, 2022) “Estate Planning: The spouse doesn’t always get everything”

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