So very often my articles for Familyaffaires.com are about wills, trusts and estate planning. If you would ask me what the #1 problem is I see when reviewing a current estate plan, it would be the titling of assets versus the terms of a last will and testament.
Remember, a will can ONLY distribute assets in the name of the deceased. It cannot distribute or direct jointly held assets except when the deceased owns assets in a Tenants In Common registration. Let’s review the three types of joint property registrations.
Tenants In Common registration indicates that each tenant owns an undivided interest in the asset in their percentage contribution to the purchase of the asset. For example, let’s assume in a second marriage the couple purchases 100 shares of XYZ Corp where the husband contributed enough to purchase 40 shares and the wife contributed enough to purchase 60 shares. So their ownership is a 40/60 %. If the asset is registered as Tenants in Common, when the husband dies 40% of the value of XYZ Corp will go to his children according to his will, not his wife.
Joint Tenancy With Right Of Survivorship (JTWROS) is usually the registration most married couples use when purchasing their new house. When either joint tenant dies the asset will belong to the surviving joint tenant(s) by operation of law outside of the will.
Tenancy By The Entirety (TBE) is similar to a joint tenancy with right of survivorship except that it is usually limited to husband and wife. About half of the U.S. states recognize TBE. Tenancy by the entirety property is usually subject only to claims for debts that are the joint responsibility of both spouses. In states that recognize TBE it adds a layer of protection for the surviving spouse since the property cannot be used to satisfy the debts of the deceased spouse until the death of the survivor.
In order to avoid the most common mistake I see, it is imperative that you carefully review your Will and the Registration of your assets to see that they are not fighting each other for the overall health of your estate plan.