I spend a large part of my practice helping clients create plans that will ensure their estates are distributed according to their desires in the most effective way possible. This involves addressing real property properly within the plan created, often leading to an interesting discussion about how title is held and what effect that has on the overall plan.
Joint Tenancy with Rights of Survivorship (JTROS)
One of the most basic ways of holding title to real property, JTROS results in all “joint tenants” owning the same interest in the property (two owners = 50/50; three owners = thirds, etc.). When one “joint tenant” dies, their interest in the property disappears by “operation of law” and the remaining “joint tenants” own the property in equal shares. No testamentary disposition of one’s interest in the property is possible, because at the moment of death that interest vanishes. Since only individuals die, it is my position that neither Trusts nor couples (as a unit) can be “joint tenants” (although I have seen deeds attempting this). JTROS will delay probate until the last “joint tenant’s” death, at which time the entire property will be subject to that decedent’s estate plan, or lack thereof.
Tenancy in Common (TinC)
By contrast, TinC is not limited to individual owners and each “tenant’s” interest in the property may be different (two owners may = 60/40). Each “tenant” may transfer their ownership interest during life and at death. Trusts and couples (as a unit) may act as a single “tenant”. TinC will notavoid probate because a passable interest exists at death.
Tenancy by the Entirety (TbyE)
TbyE is recognized by 26 states, including Oregon, and works much in the same way as JTROS, but is reserved for married couples. Asset protection advantages may exist by treating the TbyE as separate entity; however, a real estate or tax specialist should be consulted to fully understand how this works. As with JTROS, TbyE will only delay probate until the death of the surviving spouse and may not ultimately be an effective estate planning tool.
Community Property (CP)
CP, another way for married couples to hold real property, is recognized by 10 states, including California and Washington. In community property states, assets are considered part of the marital unit and when one spouse dies, the remaining spouse automatically owns the entire property. No asset protection exists; however, there may be tax benefits to the ultimate beneficiaries. As with JTROS and TbyE, this will delay, but not avoid, probate.
Trust Owned Property
When a Trust owns property, disposition of that property is controlled by the Trust and probate is avoided. Ownership by a Trust should not affect any benefits afforded to married couples, assuming the Trust includes the appropriate language.
Know how you hold title and what that means. Understanding the basics of real property titles and working with an attorney well-versed in the options can go far in ensuring one’s property is protected best for each specific scenario.
Hyperthermia, where the body’s temperature is above-normal, can be just as serious and deadly as hypothermia, where the body’s temperature is below normal.
I invite you to read this article from Alzheimer’s Weekly about Hyperthermia and Dementia, and how to recognize the warning signs and avoid it. Stay cool, everyone!
I am often asked about the difference between a Will and a Trust and why one would be chosen over the other, so I thought I would take this opportunity to discuss them both.
A Will is a legal instrument in which a person sets out how his or her estate will be distributed after death. If there is no Will, the person has died “intestate” and State laws dictate how the estate is distributed. With a Will, a person can ensure their assets are distributed to the people and in the manner they desire.
Wills do not avoid probate (the legal process in which a decedent’s assets are distributed under court supervision). In Oregon, a probate is triggered if an estate is worth over $200,000 in real property, or $75,000 in personal property. In California, that trigger is $150,000. Chances are, if you own a home a probate will be required at your death.
Probates can add unnecessary cost and time in administering an estate. It can take 6-8 weeks from the time a decision is made to petition the court to take a particular action and receipt of the signed Order allowing that action, so it’s easy to see how a probate could really slow things down. The added costs include such things as filing fees and attorney fees for drafting the necessary petitions. The result can be frustrating for all involved and more expensive than necessary.
One of the simplest ways to avoid probate is with a Trust. The three main “players” in a Trust are the Settlor, Trustee, and Beneficiary. The Settlor creates the Trust and is typically the only person who can make changes to the Trust document. The Trustee is the manager of the Trust and the Beneficiary receives the benefit of the Trust assets. In a conventional living Trust, the Settlor, Beneficiary, and Trustee are initially the same person. Only when the Settlor becomes unable to handle his or her own financial affairs does a successor Trustee (chosen by the Settlor) take over the management of the Trust.
The Settlor’s assets (house, bank and investment accounts, for example) are transferred into the Trust to be managed by the Trustee. The Settlor loses no control over the assets in the Trust since they are also the Trustee. However, because the Settlor no longer technically owns the assets, those assets are not part of the his or her estate at death and do not trigger a probate. The Trust states how the assets are to be distributed at the Settlor’s death, much in the same way as a Will, but without the need for court intervention. Trusts also provide much more flexibility in how assets are distributed at a person’s death.
It is important to work with someone who understands Trusts and Wills to help you choose the right estate planning vehicle for you. A well-crafted estate plan brings peace of mind to both the person creating it, and those administering it at the end.