Jointly Owned Property Only Avoids Probate on the First Death and May Disinherit Your Children
Nov 03, 2011 / By: Pablo Palomino, Estate Planning Attorney / Category: Blended Families, Proper Asset OwnershipMany folks such as spouses attempt to use jointly owned property to avoid probate. Jointly owned property avoids probate, but only at the first death. If probate is avoided at the second death, it’s, likely because the assets have been placed in joint names with a new spouse and your children may be disinherited.
The best way to avoid probate is with a fully funded revocable living trust. A trust is funded when all assets are either titled in the name of the trust and the beneficiary designation (of contract assets such as life insurance and retirement plans) is changed to the name of the trust.
In addition to not working to avoid probate, jointly owned property (i.e. joint tenants with right of survivorship) should be avoided for its many pitfalls such as accidently disinheriting your children.
For example,
Sally owns her investment accounts, bank accounts, and real estate jointly with her spouse, Frank. They have three children.
Sally dies and Frank inherits all the assets, outright, and in his individual name.
Frank remarries; his wife’s name is Jane. Being used to owning everything jointly with a spouse, Frank puts all of the assets that he and Sally owned together in joint names with Jane.
Frank dies.
Jane inherits everything.
Frank and Sally’s three children are totally disinherited.
The above example is of a first marriage with jointly owned assets. In a second marriage with jointly owned property, if you die first, your children will absolutely be disinherited.
Instead, look what happens if trust planning is used to avoid probate.
Sally and Frank set up a revocable living trust and fund it. Sally dies. Frank and the children inherit Sally’s share of the assets in trust.
Frank marries Jane.
Per trust instructions, the assets remain in the trust to benefit only Frank and the children.
Frank dies.
The children receive Sally and Frank’s assets in their own individual lifetime trust shares. All is well.
If you want to avoid probate, but not disinherit your children, consult with a qualified estate planning attorney and avoid jointly owned property.
Legacy APC, A Trusts & Estates Law Firm is a member of the American Academy of Estate Planning Attorneys.
Tags: Avoid Probate, Inheritance Planning, Jointly Owned Property
