Common Estate Planning Pitfalls
Are you aware of these common estate planning pitfalls?
Owning property through joint ownership
Many older parents list their adult sons and daughters as joint owners on their property, especially with real estate and CDs. This may be to avoid probate when they die. But joint ownership can lead to probate. Proper estate planning, such as a living trust, can prevent this type of situation.
Joint ownership and its complications
Martha had been a widow for just one year when she put all of her property, including her house, into joint ownership with her married son. She thought that when she died, her property would automatically go to her son without the need for probate.
Several years later, her son and his wife separated. Martha decided to sell her house so she could move in with her son. But she soon discovered that she could not sell the house without her daughter-in-law’s signature on the deed. The daughter-in-law was still legally married to her son and was entitled by law to a marital interest in the property. The title company would not insure clear title to the buyer without the daughter-in-law’s signature because it was not clear what her interest would be.
Her daughter-in- law refused to sign unless she got part of the money when the house was sold. Martha was stuck! She didn’t know that joint ownership with a married person can include that person’s spouse. And, because Martha had placed her house in joint ownership with her son, Martha lost control of her own home.
Another example
Bill and Gloria were a senior couple who put everything they owned, including their home and stock investments, in their adult daughter’s name. They believed that this would avoid probate and all of their property would pass directly to their daughter, who was an only child and unmarried. A year later, Bill died of a heart attack. Several months after that, the daughter was killed in an auto accident.
Gloria never believed she would ever survive her husband and her daughter. To add to her distress, Gloria now owned nothing in her own name; everything was in her daughter’s name. Gloria was forced to probate her daughter’s estate to get her own property back.
During this long process, Gloria had to rely on the court to grant her living expenses. Sometimes the court would approve expenses, sometimes not. And during a declining stock market, Gloria had to watch the value of her stocks fall to a fraction of their previous value because the court could not react in time to sell them quickly enough. Gloria lost her financial independence plus a substantial portion of her assets to probate. All while trying to get back what was hers in the first place.
The solution of estate planning
Contact us today to start proper estate planning. Protect your family from probate by contacting us at (949)228-9394.