My wife and I own our house in joint tenancy. Can’t I use joint tenancy to pass property without having to draw up a will?
Yes. Joint tenancy is a form of co-ownership. If you and your wife buy a house or car in both your names and as joint tenants, each of you is considered a joint tenant and has co-ownership. When one of the co-owners dies, joint ownership usually gives the other co-owner instant access to the jointly held property. You should always consult with an attorney regarding other aspects of joint tenancy.
What’s the difference between joint tenancy and tenancy in common?
In joint tenancy, you and your spouse, or a co-owner, own some sort of property. Joint tenancy means, among other things, that each owner must agree on issues such as whether to sell or lease the shared property.
In a tenancy in common, each owner owns an equal share of the property. In some states, a tenant in common may sell his or her share of the property without the consent of the other owners. Keep in mind, however, that few buyers are interested in purchasing “part” of a home, or a tenancy on common share. In tenancy in common, different partners can own unequal shares of the property.
If you own an asset in joint tenancy with anyone and you die, ownership of your portion of that asset passes to the other joint tenant automatically. In a tenancy in common, your share passes as provided in your will or trust upon your death, with possible consequences of probate, estate taxes, and so on.
Is there another way to give money to minor children besides a will or trust?
Yes. The most common way is through the Uniform Gift to Minors Act or Uniform Transfers to Minors Act. These statutes are straightforward enough that you may be able to make a gift without consulting a lawyer. They allow you to open an account in a child’s name and deposit money or property in it.
How can I use life insurance in my estate plan?
Life insurance is often a very good estate planning tool, because you pay relatively little up front and your beneficiaries get much more when you die. When you name beneficiaries other than your estate, the money passes to them directly, without probate.
Life insurance is often used to pay the immediate costs of death (funeral or hospital expenses), set up a fund to support your family so they won’t have to return to work while still under stress from your death, replace your lost income, pay for children’s education, and so on.
How do retirement benefits affect my estate plan?
Many of us are entitled to retirement benefits from an employer. Typically, a retirement plan will pay benefits to beneficiaries if you die before reaching retirement age. After retirement, you can usually pick an option that will continue payments to a beneficiary after your death.
In most cases, the law requires that some portion of these retirement benefits be paid to your spouse. IRAs (Individual Retirement Accounts) provide a ready means of cash when one spouse dies. If your spouse is named as the beneficiary, the proceeds will immediately become his or her property when you die. Like retirement benefits (and unlike assets inherited via a will), they will pass to the named beneficiary without having to go through probate. Check with a lawyer to see how such plans can best be coordinated with your estate plan.
Do prenuptial agreements play a role in estate planning?
Any couple in a situation where one partner has a lot more money or property than the other or where one partner is substantially older than the other, should consider entering into a prenuptial agreement as part of their estate planning.
Older people with grown children from another marriage may want their property to go to their own children after they die, rather than to the new spouse and his or her children. A prenuptial agreement can accomplish this purpose.
Should I give some of my property away before I die?
Making gifts during your lifetime can be a good idea, especially if you have a large estate. They can help you avoid high estate and inheritance taxes. In some states, they might enable you to reduce a relatively small estate to one that is small enough to avoid formal probate procedures.
Another advantage of giving property away before you die is that you get to see the recipient’s appreciation for your generosity. But watch out for a few pitfalls. These gifts will be subject to gift taxes if they’re larger than the amount provided by law.