Have you ever wondered how to make the complex process of probate easier to manage, or even avoidable altogether? One commonly used strategy is jointly property. This article explores one type of joint ownership which automatically passes ownership to the surviving owner: Joint Tenants with Rights of Survivorship (JTWROS).
The Double-edged Sword of Joint Property Ownership
JTWROS can be an effective way to avoid probate, as the property automatically transfers to the surviving owner. However, there are significant drawbacks to this type of planning:
- Avoidance for the First Death Only: Survivorship property only circumvents probate for the first owner who passed away. Upon their death, the surviving owner holds the asset individually, making the asset subject to probate upon their eventual death, unless further actions are taken.
- Potential Creditor Claims: JTWROS property is open to the claims of creditors of eachowner. For instance, if a son is made a joint owner of his father’s bank account to avoid probate and the son faces financial difficulties, the father’s account becomes vulnerable to these claims.
- Unequal Distribution: If a parent makes only one child a joint owner, the asset wholly passes on to that child upon the parent’s death, unintentionally disinheriting other siblings.
Why Survivorship Property Isn’t the Be-all and End-all Solution
Despite being an effective means to avoid probate, survivorship property offers a limited scope in comprehensive estate planning. It fails to address transfers to minor children, planning for blended families, protection against divorce and creditors, Medicaid spenddown protection, and more. From an estate planning perspective, the risks and planning inflexibility associated with these assets often outweigh their benefits.
Consider All Angles
While joint ownership with rights of survivorship presents a practical way to avoid probate, it’s essential to weigh its associated risks and limitations. Remember, effective estate planning can enable not only probate avoidance but also address a host of other estate-related goals.
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