Today we’re going to discuss a situation that happens all the time. Consider the following hypothetical: A woman, let’s call her Elizabeth, has passed away. Elizabeth is survived by four adult sons.
Our fictional character was a very caring woman, and she lived simply. She had a nice home with a garden and grandchildren who loved her. Nobody would ever have expected that Elizabeth had several hundred thousand dollars in the bank. Elizabeth was also very thoughtful. She left a last will and testament. She did the best job she could to express her wishes clearly, but she made one critical mistake.
Elizabeth listed her eldest son on her bank account as a joint tenant with a right of survivorship. What that means now, in simple terms, is that her eldest son is the sole owner of all the cash in that bank account.
Elizabeth knew that the son who was listed on her bank account would share the money with her other sons. She had no doubts in that respect.
Assume that Elizabeth’s son is an honest boy and wants to share the money with his brothers. He is between a rock and a hard place. If he distributes that money to his brothers, there will be huge gift tax consequences. Worse, if he dies before he’s able to make those distributions, then his estate will retain the money. In other words, if he dies before figuring out a way to get the money to his brothers, it’s likely that his mother’s last wishes won’t be fulfilled.
Why did Elizabeth choose to arrange her finances in the way she did?
The simple answer is that she wanted to avoid probate court. She wanted the administration of her estate to be simple for her children.
So what could Elizabeth have done differently?
Through the use of a simple living trust, Elizabeth could have easily accomplished her goal of avoiding probate. Even better, it would have allowed her to retain control of her assets. Shared or joint ownership is not required. More importantly, the use of a living trust would have ensured that her wishes would be carried out.
If you’d like to learn more about how you can ensure that the above hypothetical situation does not occur in your family, call our office today to schedule a complimentary Family Wealth Planning Session.
For more information about Lisa S. Golshani’s services, call 661-362-0770.