When I talk to new clients, one of the most frequent situations is something like this:
“I have a very simple estate. I own my own home, I have some retirement accounts (401k, IRA, pension), and some bank accounts (bank, brokerage, CDs, etc.). I do not need a Trust. My spouse and I own our home as joint tenants, and we own all our accounts jointly so when one of us dies the other gets everything.”
The good part about that statement is, it’s true. The bad part is there’s a whole second half of that administration that needs to be addressed!
The client is 100% correct. When the first of the couple passes away, the survivor will “get” everything. This is easy, it is fast, and there is little to no administration needed on behalf of the survivor. Now, what though? The survivor is now the sole owner of everything. What happens when the survivor passes away? Unless he/she adds kids, family, or friends onto the accounts and property, the survivor is going to need to go through probate to transfer those assets to his/her heirs. That’s not a good solution!
It may be reasonable to add children or family onto accounts with the survivor, but it comes at a cost. That cost is the opportunity for abuse and misuse. If you add a child to your real property, there can be gift tax implications, the child could mortgage the property, the child could be sued and they could come after the property. Adding someone on as a second account holder to a financial account would allow that person to write checks, change investments, and/or withdraw money. This may not be a concern for your family, but it is a concern for many.
The other issue might be, what if both joint account or property holders pass away together? Whether from an illness or accident, it is common enough to be a concern.
The way to avoid the need for any second-guessing or scrambling to handle things later is to establish a revocable trust now. It will allow the survivor to continue owning property, accounts, and assets as they would in a joint ownership situation, but without the need to change things upon the passing of the first person. By acting now and setting up your expectations and wishes in advance, you are assured your property will pass to your heirs and beneficiaries without the need for probate.
Contact Tresp Law, APC today to schedule an appointment with an Estate Planning Attorney to address this and other questions you may have about the best way to pass property to your surviving spouse, children, or other family, friends, or charities.
