What you need to know about joint tenancy

Dear Len & Rosie,

My husband of 30 years recently passed away without a will. Our home is in joint tenancy, so I know that an affidavit of death of joint tenant should be recorded with the County Recorder. Our cars were titled both our names, and all our bank accounts were also joint tenancies. Other than a small IRA, of which I am listed as the beneficiary, everything was in both of our names. As I see it, all of our assets now will pass to me and there is simply no estate to probate. Or am I over-simplifying things?

Susan

Dear Susan,

Everything you wrote is pretty much correct, but you are only half way there. You should obtain date-of-death values for any non-IRA securities you own, and you may want to have your home’s value determined, to establish the new cost basis for your assets. But what’s going to happen when you die? If your husband died without a will, you probably don’t have an estate plan of your own. Get one.

If you die without a will, your children, if you have any, will inherit your estate in equal shares by intestate succession. But what if they die before you? Your estate could fall into the hands of minor or spendthrift grandchildren who may not be responsible enough to manage an inheritance. Even worse, if a disabled child or grandchild inherits from you, he or she may lose eligibility for Social Security and Medi-Cal benefits unless the inheritance is held within a Special Needs Trust.

At the very least you should have a will that spells out how your estate is to be divided, a durable general power of attorney for financial decisions, and an advance health care directive so the loved ones you pick can make important medical decisions on your behalf if you become incapacitated.

But what you really ought to do is to create a revocable trust to avoid probate. If your estate is worth, $600,000 upon your death, then a happy lawyer will earn $15,000 in statutory probate lawyer fees. If you are worth $1,000,000, an even happier lawyer will earn a base fee of $23,000, for exactly the same amount of work. Trusts are more expensive to create than wills, but much cheaper to administer.

Why not avoid probate by putting my home into joint tenancy with your children? Don’t do this. Your children may not give it back if you ask for it. A revocable trust will allow your assets to avoid probate on your death while keeping you in charge for as long as you want.

Finally, don’t forget your IRA. You should roll over your husband’s IRA to one of your own. Just don’t forget to name your children as your IRA beneficiaries. If you forget and your IRA pays into your estate when you pass, then the IRA must be cashed in within five years of your death and your children will lose the opportunity to stretch out IRA distributions over their own lifetimes.

Len & Rosie