If you hold assets in joint tenancy you might think you are in pretty good shape from an estate planning standpoint. After all, if one party dies, the asset goes to the surviving joint tenant(s). While this is true, there could still be some very big holes in your strategy.
What happens if all the joint tenants die? What happens if they become incapacitated? Stuff does happen you know.
These are problems that most people don’t think about. I sure never thought about them until a client recently asked me these questions.
Even though the likelihood of either of these two scenarios happening is low, it makes sense to go the extra mile to protect yourself and your family just in case. The question is, how?
Joint Tenant Beneficiary
If you don’t have a trust and you hold title to assets in joint tenancy why not consider naming a beneficiary on the account? Depending on the bank, custodian or brokerage firm you use, this is easy to set up. All you have to do is let your agent know what you want to do and they’ll draw up the paperwork. Of course all the joint tenants will have to agree on who the beneficiaries should be.
Keep in mind that if something happens to one joint tenant, the surviving joint tenant(s) receive 100% ownership in the property. But if something happens to all the joint tenants, the assets may have to go through probate unless you set up beneficiary designations. The good news is this; even if the last surviving joint tenant had a will, the beneficiary designations on the account take precedence.
Joint Tenant Durable Power Of Attorney
The beneficiary designation mentioned above takes care of the property should all the joint tenants pass. But what happens if they become incapacitated? The beneficiary designation doesn’t solve that problem.
Sometimes joint tenant agreements require both parties to agree to buy or sell property. If one is disabled, the other can’t do a darn thing without the other’s John Hancock.
Other joint tenant agreements allow either party to make the big decisions and that’s fine as long as at least one has capacity. But what if one dies and one is disabled? What if they both become disabled?
The answer to this might be a Durable Power of Attorney. This is a document that gives someone else the legal authority to act on your behalf should you become unable to do so yourself. You might give this Durable Power of Attorney to your other joint tenant or you might provide it to someone else.
When it comes to beneficiaries and a Durable Power of Attorney, it’s a very smart to consult with a lawyer before making any changes. Even though the documents themselves are only a couple pages, they could be key ingredients in your estate plan.
Do you need a beneficiary and/or a Durable Power of Attorney on your joint accounts? Why or why not?
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