JTWROS Alternatives

     People seeking to avoid probate commonly choose to own their assets in Joint Tenancy with Rights of Survivorship (also known as joint tenancy). Unfortunately, this can result in unintended losses due to the financial problems of one or more of the joint owners.
     There are other strategies for probate avoidance that don't carry those risks and that can also be used to achieve estate distribution and federal estate tax minimization goals.

Incapacity Probate

     Every adult American is responsible for making their own personal, health care and financial decisions. When a person is unable to make those decisions due to incapacity, whether caused by a traumatic accident, illness, or advancing age, someone else must be appointed as guardian to do so for them. Absent other plans, guardians are appointed by the Probate Court. The process can be unpleasant for your loved ones, unnecessarily expensive, and the court proceeding opens your personal and financial circumstances to the public record.
     The fundamental legal instrument for avoiding probate at incapacity is a Durable Power of Attorney. Through a Durable Power of Attorney, you may appoint your own decision-makers and can provide them with limited or broad powers. Note that the legal authority of a Durable Power of Attorney stops upon your death. Other methods are necessary to avoid probate at death.

Death Probate and Estate Distribution

     Some state legislatures have authorized non-probate distribution methods for virtually every type of asset. 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 joint tenancy. Still, there are drawbacks. First, to achieve the probate avoidance goal, all named beneficiaries must be legal adults, have legal capacity, and must survive you. And, none of these methods help minimize federal estate taxes.

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 of the 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.