There is a great temptation to put everything in joint names with right of survivorship. Granted, having jointly held property gives a certain degree of simplicity. But as folks get older, it may actually be simpler to have property in only one name. Let’s examine some areas.
Estate Tax
If Husband (H) and Wife (W) own property jointly, they may avoid a probate of that property. However, if their estates exceed the tax exempt threshold , they may have wasted some of their tax saving ability by this simple but seemingly improper planning. Keeping property jointly may not “simplify” the taxes a family would end up paying.
Access to Funds “Doing the Right Thing”
Often as folks get older, they say “I want somebody on my account in case I get sick.”
Again, that sounds like a simple solution. Banks usually set up these accounts with multiple names by structuring them in accordance with their bank rules as deposit contracts with a right of survivorship. H wants his son (S) on the account. [But he also has a daughter (D)]. Assume there is no W. H dies. Who gets the money? S only.
D will probably scream that H never intended S to be the sole owner. Under the provisions of the Alabama Code, the bank can and must pay the account over to S. If D has a problem, then she will need to file a lawsuit that S is a constructive trustee of H’s funds and that those funds are not really S’s and should be divided as was “intended.” Again, the simple is not really that simple.
The better solution would be for H to keep the funds solely in his name and execute a Durable Power of Attorney (DPOA) to S for S to manage H’s assets. Then when H dies, this account would pass to either under the Will or by intestate succession to S and D.
You cannot be sure that S “will do the right thing.” In some instance’s blood may be thicker than water, but the “mean green” is often thicker than blood. Parents cannot rely on a child to always do the “right thing” especially when the titling of the account seems on its face to indicate an intent to “cut out” any other beneficiary.
Deeds
Property on a deed may be merely as joint tenants (JT) or as joint tenants with right of survivorship (JTROS). If the deed reads “Owner 1 and Owner 2″, then each person owns an interest in the land. If the deed reads “Owner 1 and Owner 2 JTROS,” then when one owner dies, the other owns it 100%. Such JTROS deeding is simple, but it may not be good tax planning as pointed out earlier.
How Assets Pass at Death
When you die, your assets pass: (1) by operation of law like a JTROS deed; (2) by operation of contract like a joint bank account; and (3) by your Will. If something passed other than under the Will, then the Will cannot pass it. For example, if there is a joint bank account with H and S, but H’s Will says that H wants D to get the account, D will not get the account.
Conclusion
You need to review how assets are structured. You (and probably your attorney) need to sit down every year or so and review what you have, how it is structured, and who is supposed to get it. Failure to plan may constitute planning to fail. You may need to “get out of this joint”!
