Joint accounts can sometimes be a problem for your estate.

Making all of your accounts as Transfer on Death (TOD) or Payable on Death (POD) to avoid probate sounds like a simple solution. However, sometimes it can become a complex problem, according to The Mercury in “Planning Ahead: Joint Accounts and Transfer on Death can torpedo an estate plan.”

In some states (such as California), probate is a complex and expensive problem. However, in others, it is simply a court review of the estate to make sure that everything is in the correct order. Therefore, avoiding probate should not necessarily always be the driving force in an estate plan.

Sometimes joint titling and payable on death does work, especially in families where there is only one child or one heir. This is also a good solution if the POD or joint account owner is your spouse.

However, here is where things get dicey. Let's say your spouse passes away and so you name one of your children as the joint or payable on death for all accounts. Let's say you also do that on your real estate properties and other assets and accounts.

How your accounts are titled overrides anything that your will says. If your will directs that all your assets be distributed in equal shares to your children, but your one child has become the legal owner of your assets when you die, you have created the perfect estate litigation storm.

On your death, the adult child becomes the owner and has no legal obligation to share any of those assets with his or her siblings.

To take the example further, if your child dies shortly after you then the assets could end up going to a son- or daughter-in-law that you do not like. 

Another issue that is not resolved through titling is the ability for the estate to pay expenses. If son John becomes the owner of all your assets, who is going to pay for inheritance taxes, funeral expenses and other costs associated with settling an estate?

A smarter move than taking a simple piece of advice and trying to apply it to a complex matter: make an appointment with us to create a plan for how you would like your assets to be distributed upon your death. Plan for expenses that occur, like funeral expenses and inheritance taxes. You can now rest easy knowing that you've just spared your family the divisiveness and stress that can occur from well-intentioned but inappropriate advice.

We can advise you on creating an estate plan that fits your unique circumstances.

Reference: The Mercury (Dec. 4, 2018) “Planning Ahead: Joint Accounts and Transfer on Death can torpedo an estate plan”