Oftentimes, spouses own their assets together.\u00a0 The advantage of doing so is ease of managing the asset or assets, especially if one spouse becomes disabled or when a spouse passes away. These assets often have a right-of-survivorship designation. This designation means when one spouse or joint owner dies, the assets passes wholly and immediately to the surviving spouse or owner.\u00a0 It\u2019s as if the deceased person never owned it.\u00a0 Such a circumstance presents pitfalls to watch out for in estate planning.<\/p>\n
Probate of the Asset When the Surviving Owner Dies<\/strong><\/p>\n \u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0\u00a0 <\/strong>One of the advantages of spouses holding title to property together with a right-of-survivorship provision is that when the first spouse passes away, the asset immediately passes to surviving spouse\u2019s estate without going through the probate process at the courthouse.\u00a0 That\u2019s true, but only when the first spouse dies.\u00a0\u00a0 If the surviving spouse engages in no additional estate planning to make provision for that asset upon their death, it\u2019s likely such an asset could be part of an expensive probate proceeding.<\/p>\n Unintentionally Disinheriting Children<\/strong><\/p>\n It\u2019s not unusual for a surviving spouse to add one of their children as a joint owner on some or all of their financial accounts.\u00a0 This scenario usually occurs because the parent is elderly and increasingly infirm and figures adding a child as a joint owner on the parent\u2019s accounts will help with the ease of the administration of such assets.\u00a0 The child can write checks on the parent\u2019s behalf, deal with the bank or other financial institution, etc.\u00a0 However, adding a child as a joint owner on your accounts is fraught with peril.<\/p>\n The biggest peril is what if you have more than one child.\u00a0 But you chose one child as joint owner, thinking that one lives closest and it\u2019s easiest for that particular child to assist you with your financial transactions. Well, when the parent passes away, the right-of-survivorship provisions automatically places those assets in the estate of the one child who was the surviving joint owner on all of the accounts.\u00a0 Thus, the other children receive no inheritance from those assets.<\/p>\n Other disadvantages of adding a child as a joint owner on your accounts include possibly exposing your assets to your child\u2019s creditors and troubles with management of the asset if you no longer wish for that child to be a joint owner- typically, you have to get that child\u2019s permission to be removed as a joint owner on your account.<\/p>\n What\u2019s the best way to have a child help you with your financial accounts while hot possibly imperiling your assets in the manner discussed above?\u00a0 Instead of adding a child as a joint owner on your financial accounts, ask the bank or financial institution to add your child as an \u201cauthorized signer\u201d on such accounts.\u00a0 That way, your child can sign checks and do other financial transactions on your behalf, but are not considered a co-owner of the accounts.<\/p>\n Tax Disadvantages for Significant Estates<\/strong><\/p>\n Joint ownership of assets with your spouse can present potential tax disadvantages to your estate, especially if your estate is approaching the limit of the federal death tax exemption.\u00a0 As mentioned earlier, when two spouses own assets together as joint tenants with right-of-survivorship, the entire asset passes to the surviving spouse immediately upon the first spouse\u2019s death.\u00a0 It\u2019s as if the first spouse to die never owned it.<\/p>\n When a person dies, there is the potential for their estate to pay a federal death tax of 40% on what the estate owns.\u00a0 Congress has granted an individual death tax exemption over the years, meaning a person\u2019s estate could exempt a certain amount from the death tax but anything over the exemption limit would be taxed at the going rate.\u00a0 Fortunately, the death tax exemption has increased about 800% the last fifteen years from $650,000 to 5.5 million dollars.\u00a0 Unfortunately, twice in the last five years Congress has come close to pushing this exemption back down to one million dollars.<\/p>\n How this applies to joint tenancy ownership is that when the first spouse dies, that spouse\u2019s individual exemption is forfeited for the formerly jointly-owned asset.\u00a0 So when the surviving spouse passes away, their estate can only use one federal death tax exemption.\u00a0 Whereas, if the spouses estates were kept separate for tax purposes, both spouses federal death tax exemptions could be utilized. Conceivably, a married couple could exempt twice as much of their assets from a potential federal death tax by utilizing proper estate planning.\u00a0 This proper planning usually involves the creation of a Revocable Living Trust as the core the spouses estate plan, plus property agreements that work with the Trust to more flexibly allocate assets between both spouses estates after the first spouse passes away.<\/p>\n","protected":false},"excerpt":{"rendered":" Oftentimes, spouses own their assets together.\u00a0 The advantage of doing so is ease of managing the asset or assets, especially if one spouse becomes disabled or when a spouse passes away. These assets often have a right-of-survivorship designation. This designation means when one spouse or joint owner dies, the assets passes wholly and immediately to … Continue reading Estate Planning Pitfalls of Joint Ownership<\/span><\/a><\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5,8,39],"tags":[29,31,41,40],"class_list":["post-162","post","type-post","status-publish","format-standard","hentry","category-estate-planning","category-estate-planning-options","category-joint-ownership","tag-estate-planning","tag-estate-planning-options","tag-joint-ownership","tag-joint-tenancy"],"_links":{"self":[{"href":"https:\/\/www.hometownestateplanning.com\/index.php?rest_route=\/wp\/v2\/posts\/162","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.hometownestateplanning.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.hometownestateplanning.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.hometownestateplanning.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.hometownestateplanning.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=162"}],"version-history":[{"count":1,"href":"https:\/\/www.hometownestateplanning.com\/index.php?rest_route=\/wp\/v2\/posts\/162\/revisions"}],"predecessor-version":[{"id":163,"href":"https:\/\/www.hometownestateplanning.com\/index.php?rest_route=\/wp\/v2\/posts\/162\/revisions\/163"}],"wp:attachment":[{"href":"https:\/\/www.hometownestateplanning.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=162"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.hometownestateplanning.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=162"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.hometownestateplanning.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=162"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}