How Assets Are Owned Will Affect Distribution At Death
By: Kimberly A. Paton, Esq.
Our regular readers know that I always recommend a person have a Will, Living Will and Power of Attorney.
A Will distributes “probate assets”. However, if you currently own assets with another person or have an account that names another person as “POD”, “TOD”, “ITF” or otherwise establish a beneficiary, then such account is not a probate asset and will not be distributed pursuant to your Will. This account will be distributed to the named joint owner or beneficiary. (This can be true of many assets - real estate, stocks, bonds, insurance, CDs, 401(k) plans, IRAs, etc.)
It is important to review how assets are owned when you prepare your Will to insure that the Will shall control. It is also important to remember this after you have signed your Will, when opening new accounts, changing accounts, purchasing assets (house, stocks, bonds, etc.) to ensure that the asset is distributed as you desire. Perhaps you do intend that your co-owner will receive the asset even though the Will specifies a different distribution. That's OK; however, you want to be in control of this decision. For example, typically a Mother has a Will that leaves everything equally to her children. Mother may open a bank account with a joint ownership with her daughter. Was this for convenience? Did Mother expect that this bank account would be distributed equally to her children (as per her Will), or, did
Mother intend that the daughter named as joint owner would receive those “extra” assets at her death as a “thank you” for the extra care the daughter provided Mother?
Mother can leave her assets as she chooses. However, she must understand that a joint account will go to daughter. Planning tip - If Mother does not intend daughter to get this whole account, she could sign a Power of Attorney and leave the account in Mother's name to avoid any question. Alternatively, if Mother wants daughter to receive the extra account, it's helpful to let your other children know this, with a brief note kept with Mother's Will.
Another important consideration is tax consequences, and Medicaid consequences.
Sometimes, Mother adds daughter to an account thinking that this will “save taxes” or protect the assets from “Medicaid”. In general, this doesn't work. However, this is very complicated and facts must be considered and analyzed before making any such determination.
Additionally, such a gift may create capital gains taxes that could have been avoided if the asset/house stayed in Mother's name.
We at Wells, Jaworski & Liebman, LLP can review your assets and goals and properly counsel you on how to best accomplish those goals and avoid unexpected consequences or family turmoil.
Kimberly A. Paton is a Partner at WJ&L and is the Chairperson of our Estate Planning, Probate and Elder Law Department.
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