Estate PlanninG

PROBATE ISSUE: Unintended Consequences When Surviving Spouse Sets Up Joint Tenancy on Property

The majority of married couples own title to their home as "Joint Tenants with the Right of Survivorship" ["JTRS"]. One of the main reasons is that each spouse has an equal, undivided ownership right to do with the property as they see fit. But, unlike Tenants in Common, the other spouse cannot dispose of or encumber the property without the prior approval of the other spouse.

Upon the passing of a spouse, by operation of law, title to the property passes in full to the surviving spouse.

Another reason property is held as JTRS is to avoid probate.

This is all well and good, but the questions that is often overlooked and addressed too late is....... Probate also avoided when the surviving spouse passes?

The answer is NO, unless the following precautionary measures are taken:

(1) the preparation of a living trust or

(2) the creation of a new JTRS.

TIP:please note that title on the deed takes precedence over any conflicting instructions in a will or living trust. So review your living trust and will to ensure that your inheritance wishes conform with title on the deed.

What unintended consequences occur when a new JTRS is created by the surviving spouse?

Illustrative Scenarios: Let's say that the surviving spouse, the husband, adds his daughter on title as joint tenant to the house he now solely owns because of the passing of his wife.

Scenario #1: What if the daughter gets divorced or involved in a lawsuit? Since the daughter has an equal, undivided interest in the home as a joint tenant, the home could be tied up in a divorce action for years. If a judgment is obtained against the daughter in a lawsuit, the house could be seized to satisfy a judgment.

Scenario #2: What happens if the home needs to be sold to pay for the father's care since he has Alzheimer's and needs 24/7care in a skilled nursing facility? Unfortunately, in this day and age, this is not an uncommon scenario. The father does not have long term care insurance or enough savings to pay for the estimated $4,000 - $6,000 month fee charged by the skilled nursing facility. His only remaining asset is the house, which needs to be sold ASAP. Also, he did no estate planning and does not have a living trust or a durable power of attorney.

The only option for his daughter is to go to court and obtain a conservatorship of either the person and/or estate of her father. This is a very expensive and time consuming procedure. In addition, all of the her father's personal and financial business is open for the world to see since this is a public proceeding.

Scenario #3: What if the daughter has turned out to be a spendthrift and irresponsible. The surviving spouse wants to take her off title. Can he do so without his daughter's approval? The answer is NO. Unless the surviving spouse can convince his daughter to give up title, his only recourse is to initiate a court action against her, again requiring the expenditure of a great deal of time and money.

Scenario #4: What if the surviving spouse remarries and adds his new spouse to title? Regardless of what is written in the surviving spouse's will or trust, or if the surviving spouse told his new wife that he wants the house to go to his daughter, since the new spouse is the only one on title, she will inherit the house solely in her name and can dispose of it as she sees fit.

The wife has no legal duty to comply with the wishes of the surviving spouse. An argument could be made that the wife has a moral duty, but unfortunately that is not actionable in a court of law.

So the moral of this story is to speak with an Attorney to assist you avoid the above pitfalls to make sure your estate planning documents match any external documents that control the disposition of your assets so that your final wishes are honored.

Please feel free to contact the Attorneys at Blackwell & Santaella for further information or assistance.