In this elder law minute, Wes Coulson discusses joint tenancy and beneficiary designations, and if they are a good way to avoid probate.
I want to talk today about whether beneficiary designations and joint tenancy can be a good inexpensive way to avoid probate, without having to have a living trust. Let me tell you why I think it’s a bad idea.
Let’s start with joint tenancy. First thing that a lot of people don’t know, is that when you add someone to your account as joint tenant, if anything bad happens to them financially, 100% of that asset is at risk. So if you have one child and say just go ahead and put their name on, if you’re retired you’re probably low risk financially.
If they’re still working, they’re much higher risk financially, so you’ve made (to me) a possibly terrible mistake in doing that. Also when you do the joint tenancy, if you have four kids and you put one on as joint tenant for convenience, law may not see it that way. You may have left all of that asset to that one child.
In terms of beneficiary designations, I’ve never seen a beneficiary form that has addressed questions like (for instance), if one of my children happens to die before me, what would happen to that one’s share. You leave that as an unopen question. If it happens and the people who would take that share are minor children, they’re only getting their share through a guardianship.
If something happens and you want to change that, the way that you have things set up with those beneficiary designations, if you have 15 accounts, 4 life insurance policies, and 2 annuities, your plan is dependent upon making those changes across all of those assets. Whereas, if you have a living trust named as beneficiary, you have avoided the joint tenancy problem, you have a backup plan for everything that could happen, and if you decide to make later changes in your estate plan, you make it once to the living trust and you have with certainty covered everything.
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