JTWROS Alternatives

     Joint Tenancy with Rights of Survivorship (JTWROS) is a very common form of asset ownership for people seeking to avoid probate upon incapacity or death. Unfortunately, JTWROS can create many unintended and rather unfavorable consequences.
     Fortunately, you can avoid probate by employing alternative planning methods, and without the risk of losing your assets due to the problems of others. Also, certain alternative methods can facilitate your estate distribution and federal estate tax minimization goals concurrently.

Incapacity Probate

     Every adult American is responsible for making their own personal, health care and financial decisions. Few people would choose to be declared legally incompetent by a probate court. In short, the probate process can be an unpleasant inconvenience for your loved ones, entails unnecessary expenses and opens your personal and financial circumstances to the public record.
     The most fundamental legal instrument for avoiding incapacity probate is a Durable Power of Attorney. Through a Durable Power of Attorney, you may appoint your own decision-makers and can provide them with very limited or very broad powers. The legal authority of a Durable Power of Attorney stops upon your death. Other methods are necessary to avoid death probate.

Death Probate and Estate Distribution

     Some state legislatures have authorized non-probate distribution methods for virtually every type of asset imaginable. Perhaps you have heard of such arrangements as Pay on Death bank accounts, Transfer on Death automobile titles, or even Beneficiary Deeds. These certainly are preferable distribution methods when compared to JTWROS. Nevertheless, probate may not be avoided unless all named beneficiaries are adults, have legal capacity and survive you. Similarly, these methods do not facilitate federal estate tax minimization. Bottom line: Like JTWROS, statutory non-probate transfer methods should only be employed with an appreciation of the risks involved.

Revocable Living Trusts

     Much has been written about Revocable Living Trusts over the past few decades. For some people Revocable Living Trust (RLT) planning is too much, for some it is too little and for some it is just right.
     Basically, an RLT is a legal arrangement between three parties ... and you are all three parties. You are the maker of your RLT, serve as its initial manager, and enjoy the assets it controls as its initial beneficiary. As a result, whether you are healthy, incapacitated and even after your death, you can control who manages your assets held in the RLT and who benefits from them.
     An RLT is one of the best all-around legal instruments available for probate avoidance, estate distribution and federal estate tax minimization (for married couples). However, to work properly all of the legal i’s must be dotted and all of the legal t’s must be crossed.