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WHAT ABOUT USING JOINT TENANCY OR DESIGNATED BENEFICIARIES FOR ESTATE PLANNING?

Joint Tenancy

                        • joint tenancy does not avoid probate altogether, it only delays it

                        • joint tenancy may have many unintended and unfavorable consequences

                        • joint tenancy can created significant estate, gift and income tax problems

 

Many people plan by putting their assets in joint tenancy for the purpose of avoiding probate. However, joint tenancy only avoids probate when there is a surviving joint tenant. When the last former joint tenant dies, the property will be probated unless it has been transferred to a trust. The joint tenancy form of ownership may also have many unintended and unfavorable consequences. For example, if a person places a home in joint tenancy with a son or daughter the entire property is usually subject to attachment by a creditor of any one of the joint tenants. Once the asset passes to the surviving joint tenant he or she owns the property outright, so not only is the property subject to attachment by that person's creditors, but also the survivor has absolute control over the property. If the surviving joint tenant is a surviving spouse who remarries, it is quite possible that the property may never end up in the hands of the decedent's children. There are also significant estate, gift, and income tax problems that can arise from joint tenancy.

 

Beneficiary Designations

                        • beneficiary designations make no provision for estate tax planning

                        • beneficiary designations do not protect from creditors or unscrupulous people

 

Beneficiary designation is another form of estate planning for insurance and retirement plans. In this area, the problems arise from a failure to coordinate beneficiary choices with the rest of the estate plan. This area is too complex to discuss in this article, but keep in mind that you should always ask your advisors about coordinating beneficiary designations with the rest of the plan. In any case, you should almost never designate your estate as a beneficiary.

 

As you can see, unintended and unfortunate results can occur without proper planning.

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