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Money May 2013

Legal Ease

Everything in Joint Title? Wills and Trusts Are Still Vital

By Jonathan J. David

A further complication is that you own real estate in two states other than where you live, and if probate is required due to one of the events mentioned above, then probate will also be required in each of those separate states for that real estate.

Dear Jonathan: My wife and I have a net worth of approximately $1,000,000. Our assets consist primarily of bank and investment accounts, IRAs, our home and two vacation properties located in different states. Other than our separate IRAs, everything we own is titled in both of our names. Because we have everything titled in both of our names, it is my understanding that when one of us passes away, there will be no probate that the survivor will have to deal with. If that is the case, am I correct that there would be no point for us to have wills or a trust? We know that financial and health care power of attorneys are totally different issues and are important to have in their own right, so we do have those. I look forward to your response.

Jonathan Says: It is good to know that you have financial and health care durable power of attorneys in place because those are essential documents that everyone should have.

Regarding your specific question as to whether having wills or a trust are necessary when a husband and wife own everything in joint names, it is true that so long as one of you survive, that those assets that you hold in joint names will not need to be probated and will automatically vest in the surviving spouse.

Consequently, assuming that is what happens, i.e., there is a survivor, then no probate will be required at the first spouse’s death. The problem, however, is that you cannot know for sure whether one of you will survive. For example, the two of you could die in a common accident, in which case probate would be required since there will be no survivor. Also, even if one of you survives, there is no guarantee that the surviving spouse will prepare a trust and transfer his or her assets to that trust prior to death, in which case probate will also be required.

A further complication is that you own real estate in two states other than where you live, and if probate is required due to one of the events mentioned above, then probate will also be required in each of those separate states for that real estate.

For the reasons mentioned above, I recommend that you both prepare last will and testaments, as well as a trust. Although having a will does not help you avoid probate, it is still important to have because it allows you to make sure that any assets either one of you might have in your name alone at death passes to the beneficiary named in that will, which in this case I would recommend be your trust.

If one of you were to die without having a will and with assets titled in that person’s sole name, those assets would not only need to be probated, but they would pass pursuant to state law, and those assets would never end up in your trust. You can avoid this uncertainty by implementing a trust now and then re-titling your real estate, as well as your bank and investment accounts to that trust. If you do this, you will not have to worry about the two of you dying at the same time or the surviving spouse not creating a trust prior to his or her death. In other words, you don’t have to worry about the unknown because you have already planned for it.

My recommendation is that you meet with an estate planning attorney in your area who can review with you in more depth the advantages of having wills and a trust, and what is involved in transferring your assets to the trust, as well as what will happen if a probate becomes necessary at either one of your deaths. At the same time, he or she can review with you what other benefits, other than probate avoidance, having wills and a trust can afford you. Good luck.

 

Jonathan J. David is a shareholder in the law firm of Foster, Swift, Collins & Smith, PC, 1700 East Beltline, N.E., Grand Rapids, Michigan 49525.

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