One of the most common areas of estate planning that is overlooked seems to be the actual ownership interests in property. Oftentimes, a couple will arrange to have a will drafted or arrange to go online and draft one themselves, and in their minds, they need the simplest of arrangements. It is possible that they do only need a simple arrangement. However, simple needs to still include an examination of in whose name the assets and debts are titled. An examination of where the asset or debt is located is necessary. I come across many people that simply think that once the paperwork is prepared, the Will takes care of everything. The problem with this misconception is that although someone may have every intention to pass an asset to another person, they neglected to consider the actual ownership interest they may have in a certain piece of property, or where it may be located and the potential aggravation they are creating in not reviewing this aspect of their estate plan.
Title to Property Among Family: Older and Widowed Dad leaves all property to two sons equally. During his life, Dad gave to Older Son a 50% interest in the house Older Son now lives in with Older Sons wife, so before death, Dad and Older Son owned the house as tenants in common (IE. No right of survivor ship). Dad dies.
Dad neglected to consider: Evil Younger Son now has a quarter interest (via the half interest he inherited of the fathers half interest) in Older Son and Older Sons (and family’s) house. Evil Younger Son now has the power to make life miserable for Older Son and his family.
Easily Preventable Problem: Dad could have reviewed the title to the house when preparing his will and arranged to own the house jointly with Older Son with rights of survivor ship.
Title to Property and Federal Estate Tax Considerations: In considering the Federal Estate tax and exemption, there is a great deal of uncertainty with what may happen with the exemption amount and rule allowing a step up in basis for property. In considering the uncertainty, people are still arranging to set up Bypass Wills, or Credit Shelter Trusts for their families.[1] When a trust like this is set up, it is vital to review the title of assets. Oftentimes, a family could spend a decent amount to set up this type of arrangement only to discover later that the entire plan was defeated because all property was owned jointly between them, so that no property would go through probate and no property would then be passed into the Credit Shelter trust that was set up in the Will.
Title to Property Located Out of State: If you own real property in your personal name but you reside in another state, a separate probate process will need to take place for that out of state property. If you have property that you own outside of the state in which you reside, it is important to consider the cost of the sale or transfer of real estate during a probate process in the state where the real property is located. In some states, the transfer of property during the probate process is an expensive hassle, no matter how simple your estate. In Georgia, if a matter is uncontested, and there is a Will in place, the probate process can be a relatively smooth and inexpensive one.There are several easy solutions to avoid a separate probate process, but the main point is, the issue needs to be identified and addressed. Even if you do discover that you have no complications, it is worth the hour or two to find out.
This article was written by Dara Berger. Mrs. Berger is an estate planning and immigration attorney in Atlanta, who occasionally contributes to this blog. She can be reached at dara@dlb-legal.com.
[1] A bypass Will or Credit Shelter Trust provides that when the first spouse passes away, an amount up to the exemption amount will go into a trust for the surviving spouse so that when the second spouse dies, he/she gets the benefit of both the first spouses exemption amount and his/her own exemption amount, thereby preserving more for the children or other beneficiaries.