Joint Tenancy, a Will or a Trust? What's the Best Way to Plan Your Estate? |
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By: William K. Hayes Posted: 2006-10-08 21:57:46 |
| estate plan for you if you don’t have your own,” is preferable to creating your own estate plan.The problem is that newspapers, magazines, and other media often present conflicting views on whether it is best to choose joint tenancy, a will or a trust as your estate planning vehicle. Who’s telling the truth?Let’s take a look at the three fundamental goals of an effective estate plan:(1) Transferring your property to those you designate in a timely and efficient fashion,(2) Providing for management of your property if you are physically or mentally unable to do so yourself, and(3) Minimizing the amount of estate taxes imposed by the government as your property passes to succeeding generations.Now that you know what an estate plan is supposed to accomplish, you can see how the “Big Three” estate planning vehicles stack up. Joint Tenancy is frequently thought of as a “poor man’s will” because the asset transfers automatically upon death to the people named on the title.What this technique offers in convenience it loses in protection. Consider the case of Dorothy Schmit vs. the Internal Revenue Service. Mrs. Schmit put her husband, who happened to be delinquent in his taxes, on “her” property as a joint tenant for convenience. Mrs. Schmit had to sue all the way to the 9th Circuit Court of Appeals, an expensive proposition, to get the IRS to finally accept the “nominal” status of her husband.Both wills and living trusts are more sophisticated ways of transferring property to your heirs. The primary difference between wills and trusts is that wills require a probate administration that can add time and costs to the disposition of your estate. This is true even in the “simplified probate” procedures available in many states. At the margin, avoiding the additional costs and publicity of probate by the use of a living trust is preferable.Joint Tenancy, a Will or a Trust? Page 2 of 2If the issue of property management during a property owner’s incapacity arises, both a properly prepared will or trust-based estate plan will have a durable power of attorney which enables someone you have chosen to manage your property. However, a living trust offers additional “substitute management” in the person of a successor trustee for assets in a living trust. Handling property management with a living trust can be of great help because many financial institutions and insurance companies are hesitant to accept durable powers of attorney, but are comfortable with successor trustee management.In summary, the living trust’s avoidance of probate and the protection of the successor trustee in the case of incapacity are strong reasons to consider a trust-based estate plan.In deciding which estate planning strategy will work best for you, the best course of action is to seek the assistance of an attorney whose practice is focused on estate planning. Members of the American Academy of Estate Planning Attorneys are required to meet greater educational requirements than most attorneys and must also receive continuing education on the latest changes in laws that affect estate planning, allowing them to provide the highest quality service. |
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