Sad, but true.
Many estate planning feuds among surviving family members are avoidable.
Asset "titling" mistakes oftentimes put match to fuse to gunpowder.
Can you say BOOM!?
Here is a common scenario:
Widow and one of her adult children reside in the same town, or even in the same household. The other adult children live far, far away.
The local child may be very responsible, looking after mother's daily business.
This "business" may include taking mother shopping, shuttling her to and from doctors, picking up her prescription drugs, and making popcorn in the evening as they watch Kansas City Royals baseball.
Sooner or later, the local child may help mother with bill paying, income taxes and investing. At some point, mother will add the "name" of the local child to her checking, savings and investment accounts.
Perhaps even to her home.
Mother knows this local child will continue to manage her "paperwork," even if mother develops dementia like her own mother did, and someday local child will "inherit" and share everything equally with the non-local children.
Hmmm.
Let's unpack this now:
Question: Is the local child "named" on the account for "convenience" purposes or as a "joint tenant with rights of survivorship"?
Scenario #1: "Convenience."
If the local child is on mother's accounts as a "convenience," then she will have access to use the account only for mother's benefit.
Just like it sounds, the local child is only on the accounts solely for mother's convenience.
The laws of many states authorize such accounts.
Problem: What if the local child is not responsible or has a change of heart and begins "dipping into the till"? The account could be drained before it is noticed. The local child may be personally penniless and, well, you get the point.
Not good.
Scenario #2: "Joint Tenant with Rights of Survivorship."
If the local child is on mother's accounts as a "joint owner," then the local child has received a "gift" of the accounts from mother and is just as much an owner as mother.
If the local child has a divorce, lawsuit or bankruptcy, then mother could lose it all while she is yet alive.
At mother's passing, the local child will own it all.
Yes, all.
Period.
If the local child does share with the far, far away siblings upon mother's death, then it may cost the local child "gift taxes" on the transfers.
But the local child does not need to share one wit ... and will not be inclined to share if the far, far away siblings get snarky about it.
What then?
In the famous words of estate litigation poet Warren Zevon ... send lawyers, guns and money!
A recent financialplanning.com article, titled “Titling Mistakes Can Disrupt Estate Plans,” considered these issues.
The article tells the tale of a daughter who wanted her name "put on" all of her mother's accounts.
Give it a read, as the lessons to be learned are key to avoiding the avoidable.
Alternative solution?
Use a "general durable power of attorney" so the accounts can be managed for mother now and if she later becomes incapacitated.
Instead of adding one more more non-spouse as a "joint tenant with rights of survivorship," use pay-on-death (POD)/transfer-on-death designations to pass accounts without probate in equal shares to the local child and the far, far away siblings.
While you are at it, do not forget to ensure that beneficiary designations on life insurance, retirement funds and annuities are consistent with mother's inheritance distribution objectives, too.
Above all, work with an experienced estate planning attorney before adding a non-spouse to any account as a "convenience" or as a "joint owner".
So, how do you find an "experienced" estate planning attorney?
First, ask around. Friends, family and other professional advisors are trustworthy sources.
Second, conduct an "organic" search on "Google" for "estate planning" near you (e.g., "estate planning Overland Park KS".
Third, either way, verify. Check out the education, experience, ratings and client reviews of any attorney before you contact him or her.
How?
There are two helpful resources just a mouse click away to assist with your due diligence: Avvo.com and Lawyers.com.
Check any Avvo ratings, client ratings/testimonials and attorney endorsements on Avvo.com and any "peer ratings" by judges/other attorneys and any client ratings/testimonials on Lawyers.com.
In fact, I use both of these services to thoroughly vett attorneys before referring members of our "client" family for legal help in other areas of law or for matters in jurisdictions outside Kansas or Missouri..
Remember: “An ounce of prevention is worth a pound of cure.” When making your financial, tax and estate plans, do not go it alone. Be sure to engage competent professional counsel.
Reference: financialplanning.com (August 27, 2015) “Titling Mistakes Can Disrupt Estate Plans”
Comments