No matter how wealthy people are, most do not want to spend money for services, such as estate planning, that they believe to be unnecessary. However, as a recent article explains, this reluctance can lead to costly mistakes where estate planning is concerned.
One of the most common ways by which people attempt to create an estate plan while saving the cost of hiring an attorney is transferring all of their property to joint tenancy. In order to shift an asset to joint tenancy, a person need only add a person’s name to the asset. This type of property is often referred to as “Joint Tenancy With Right of Survivorship” (“JTWROS”).
Although JTWROS is appropriate for many situations, it should not be used for an entire estate plan. One common problem is that the joint tenant may predecease the decedent. Therefore, the asset will end up in probate.
Many people also believe that if they hold property in a joint tenancy, then direct that the particular asset be disposed of differently in their will, their will trumps the joint tenancy. This is simply not true, as a JTWROS is a binding contract. Moreover, complications may arise if the joint tenant owes money to creditors or has marital problems. The creditors of the joint tenant, as well as the joint tenant himself, be able to reach the property held in JTWROS.
