Summary: There are many techniques that
can help you avoid the potential costs and delays of probate. Just because all
of these techniques can be entirely effective at avoiding probate does not,
however, mean that they are all equal. With some of these techniques, the
benefits of probate avoidance come with a downside of greater risks -- risks
that your planning goals may be stymied, or that your plan could end up
requiring costly and time-consuming court litigation to sort out.
Joint tenancy with right of survivorship
(JTWROS) accounts, as well as pay-on-death or transfer-on-death accounts, can
be wonderfully useful tools in some situations. Sometimes, they can be a
helpful part of your overall estate planning. In certain circumstances, they
can be a simple and low-maintenance way ensure that your assets pass to your
desired beneficiaries without the hassles, costs and delays of probate
administration. However, in many other situations, they can be risky way to try
to avoid probate. They can potentially put your wealth in jeopardy if the
person you've added to your account decides to use the account funds for his
own purposes, rather than your goals. Alternately, even if the person you've
added to your account is above reproach, your assets could still be at risk if
that person divorces or is successfully sued by someone. What's more, they ca
also pose the potential of requiring expensive and stressful court litigation
in order to get your wealth to the beneficiaries that you wanted to have it.
Take, for example, a case decided by the
courts in September 2016. The case involved the estate of man named John, who
was a senior in declining health in the final years of his life. He had both a
checking account and a savings account. He had several people listed on his
checking account as authorized signors. They included, in addition to John, his
daughter, a grandson and the grandson's wife. On the savings account,
authorized signors included John, the daughter and the grandson's wife.
The problems arose shortly after John
died. First, the grandson withdrew $22,000 from John's checking account. The
grandson's wife then withdrew nearly $26,000 from John's savings account. This
sum of almost $48,000 represented roughly 50% of the total amount in the two
accounts combined. The couple claimed that they were entitled to the money
because the accounts were joint accounts with right of survivorship. In an
account that is truly a JTWROS, all of the "tenants," or owners of
the account, have equal claims to the account's assets in the event of the
death of the account holders.
In John's case, the problem that led to
the court battle was a lack of clarity. If the account truly was a JTWROS
asset, then the grandson and his wife had the legal right to withdraw the funds
that they withdrew for whatever purposes they wanted. However, John's daughter,
who was acting on behalf of John's estate, claimed that the grandson and wife
were not joint tenants; they were only added to John's accounts as signatories
as a convenience to John. Ultimately, the courts sided with the daughter. The
trial court ruled that the grandson and wife didn't have any evidence to show
that John intended for the money in his checking and savings to pass to the
daughter, grandson and grandson's wife as a JTWROS account would. If the
outcome reached by the courts was not what John intended, then at least some of
the objectives of his estate plan were frustrated. Even if the outcome did
reflect John's goals for the money in his checking and savings, which appears
to have been more likely, it still took an expensive and time-consuming court
battle to achieve this end.
Careful planning can potentially help
you avoid an unfavorable situation like what happened with this man's estate.
There are ways to create a plan that will take the guesswork out of your
planning goals. One example is a revocable living trust, which can allow you to
dictate, with great specificity, exactly what you want to achieve with regard
to each of your assets and each of your beneficiaries. In addition to this, it
can also benefit you by avoiding probate while at the same time sidestepping
some of the risks involved with other probate-avoidance techniques like JTWROS
accounts.
This article is published by the Legacy Assurance Plan and is intended for general informational purposes only. Some information may not apply to your situation. It does not, nor is it intended, to constitute legal advice. You should consult with an attorney regarding any specific questions about probate, living probate or other estate planning matters. Legacy Assurance Plan is an estate planning services-company and is not a lawyer or law firm and is not engaged in the practice of law. For more information about this and other estate planning matters visit our website at www.legacyassuranceplan.com.
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