Titling assets through joint tenancy works well, until it doesn’t.
Going without an estate plan and relying on titling assets through joint tenancy to a surviving spouse can be a workable plan but then again, it can become a nightmare, according to the Santa Cruz Sentinel in “After husband’s death, wife needs to create revocable trust“.
Most of the assets in the plan created by her husband, in this case, did pass to the wife outside of probate. However, there are a number of details that remain. She needs to obtain date-of-death values for any non-IRA securities the couple owned, and she should also have their home’s value determined, so that a new cost basis for the house will be established. She also needs an appointment with an estate planning attorney to create a will and an estate plan.
If she dies without a will, her children will inherit the estate in equal shares by intestate succession. However, if any of her children pass before she does, the estate could be distributed to her grandchildren. If they are of legal age, there is no control over how the assets will be managed. Making matters worse, if a child or grandchild is disabled and receiving government benefits, an inheritance could make them ineligible for Social Security and Medicaid benefits, unless the inheritance is held within a Special Needs Trust.
Another reason for an estate plan: a will details exactly how assets are distributed, from the set of pearls that great aunt Sarah has kept in the family for decades to the family home. A durable power of attorney is also part of an estate plan, which lets a named family member or trusted friend make financial decisions on your behalf, if you become incapacitated. An estate plan also includes a health care proxy so a loved one can make medical decisions on your behalf if you are not able.
These are the basics of an estate plan. They protect loved ones from having to go to court to obtain the power to make decisions on your behalf, as well as protect your family from outsiders making claims on your estate.
A revocable trust is one way to avoid probate. An estate planning attorney will be able to evaluate your own unique situation and determine what the best type of trust might be for your situation.
You may be thinking of putting your home, most families’ biggest asset, into joint tenancy with your children. What if one or more of your children have a divorce, lawsuit or bankruptcy? This will jeopardize your control of your home. A revocable trust will allow your assets to remain in your control.
The last piece in this estate is the IRA. If you are the surviving spouse, you’ll want to roll over your spouse’s IRA into your own. Make sure to update the beneficiary designation. If you neglect this step and the IRA pays into your estate when you pass, then the IRA has to be cashed in within five years of your death. Your children will lose the opportunity to stretch IRA distributions over their lifetimes.
An estate planning attorney can advise you in creating an estate plan fits your family’s specific circumstances.
Reference: Santa Cruz Sentinel (March 24, 2019) “After husband’s death, wife needs to create revocable trust”