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Estate planning: joint tenancy and asset ownership

When establishing an estate plan it is important to determine how you own something, such as an investment account, real estate property or even a checking account. Consider the example of a couple who brings not only separate property to a second marriage, but children as well, like many blended families in Michigan. The couple went about classifying all of their assets as joint tenancy. Joint tenancy or joint tenants is a term that deals with the rights of survivorship.

The couple put everything into joint tenancy for convenience, should one of them become incapacitated the other spouse would be able to manage the account and pay the bills. This might make sense from an account administration point-of-view, but not so much from an estate planning view. The couple had determined that many of their joint tenancy assets had a different beneficiary than the surviving spouse.

To add even more complications, the wife had a different payable on death designation than her husband on several of her accounts. Although the account listed her husband as a joint tenant or account holder, she had intended for her son to be the beneficiary of these accounts upon her death. Under joint tenancy the accounts would have gone to the husband and then upon his death, to her son.

Like many people, the couple just assumed that the assets held through joint tenancy would transfer to the payable upon death designated beneficiary as intended, not the surviving spouse. That was not the case in every account and asset held by the couple. A solution to the problem could be a durable powers of attorney, rather than a joint tenancy.

Designating a durable powers of attorney allows each spouse to manage the other's accounts while he or she is alive and incapacitated, whereas upon one spouse's death, the account or property would pass to the payable upon death designee. A durable powers of attorney offers much more than just account making decisions and should be discussed with an estate planning attorney to explore all of its possibilities.

Of course, it is always a good idea to discuss how your property and assets are titled with an attorney in your state as well, to ensure local laws are addressed and your accounts will be managed as you intend. As discussed in a previous post, a joint tenancy has other limitations, including possible inheritance tax issues in certain situations.

Source: Times-Herald Record, "Your Finances: Asset titles can make or break estate planning," Laura Medigovich, June 23, 2012

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