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Estate Planning

When Joint Tenancy Ownership Isn't Enough

Joint tenancy designations are not perfect. Joint tenancy tends to give people a false sense of security. Remember that joint tenancy deals with only the transfer of title on death.

Ownership of assets as "joint tenants" is one of the oldest forms of probate avoidance. It is simple, inexpensive and quick to set up. For this reason, it is often referred to as the "poor man's probate." Bank and other financial accounts can be created without the need for attorneys. In Arizona, however, joint tenancy ownership of real estate must be accomplished by compliance with certain rules.

See related article: The Problems with Joint Tenancy Ownership

Real estate owned by two or more persons as "joint tenants" that does not include the words "with rights of survivorship" is not adequate to pass property to the surviving joint tenant. The missing term "with right of survivorship" means that the joint tenants are really "tenants in common," i.e., they own a separate interest in the same real property. This designation subjects a deceased joint tenant's property to probate, where the interest passes in accordance with the deceased joint tenant's Last Will and Testament or by intestacy (that is, in accordance with the laws of the state). This type of designation may pass property to unintended beneficiaries if the Will or state law gives the property to someone other than a joint tenant. Because the form of the deed is important, it is best to have the deed prepared by an attorney, although a title company can be a less expensive alternative.

Joint tenancy designations are not perfect. Joint tenancy tends to give people a false sense of security. Remember that joint tenancy deals with only the transfer of title on death. It is absolutely useless to protect one during his or her lifetime.

For example, let's assume that Mom becomes incapacitated and needs to be placed in an assisted living facility. A joint tenancy designation on bank accounts may give Sonny access to the funds to provide for Mom's care, but it does not enable Sonny to sell real property to pay for Mom's care. Assuming that Mom does not have a trust, she should have a financial power of attorney that would authorize Sonny to act on her behalf in the sale of her residence when she becomes incapacitated.

A joint tenancy designation does not allow the joint tenant to make health care decisions. A special type of power of attorney is used for this purpose, i.e., a "durable medical power of attorney."

A person who is attempting to avoid a probate on death should also plan for their incapacity by having both a financial power of attorney and a durable medical power of attorney. These instruments allow a designated person to make decisions for Mom in the event that she is incapacitated and avoids the need for a guardianship and/or conservatorship.

 
          

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