Common Estate Plan Problems

Problems with Joint Tenancy

 There is a loss of full control of the asset during your lifetime because the other joint tenant must consent to and join in any sale. (This applies to a second marriage or a child on the title with a parent.)

 The last joint tenant to die owns and controls the asset.

 Joint Tenancy (JT) avoids probate on the death of the first joint tenant, but, with one exception, it guarantees probate on the death of the last joint tenant who owns the property, which can cost significant legal fees and expenses.

 JT can lead to the wrong persons receiving the asset, such as children of a first marriage being totally disinherited for the value of the asset, or one child receiving the asset to the exclusion of other children. Part of jointly owned assets may be lost if there is a divorce.

 JT with a second spouse should be avoided because it creates a presumption the asset is now “marital property” for purposes of divorce.

 A will or revocable living trust does not control or involve assets titled in joint tenancy, and beneficiary designations control over a will or a trust (unless the property is titled in the trust).

 Assets in JT are not available to fund a tax-saving trust, if needed, which could lead to possible or higher federal estate taxes.

 Gift tax issues may arise if joint tenancies are created for anyone other than a spouse, such as adding one or more children to the title. In addition, such a transfer can’t avoid capital gains taxes like a trust can.

Problems with General Power of Attorney

What Is It? Lawyers will prepare a “durable general power of attorney” for you to sign so that you will have named someone to manage your money if you become disabled.

Purposes: It may help preserve your privacy and avoid the expenses and delays that would happen in a conservatorship court proceeding if you became mentally incapacitated by stroke, car accident, fall, or dementia.

Problems with a Power of Attorney:

1.   Misuse: It appoints another person to handle all of your assets and property, without limitation, so it can easily be abused. It’s like a blank check so you really have to trust the person you name as agent or successor agent. Your agent is not limited to the funds in your bank account

2.   Nobody Has to Accept It: Nobody has to accept a POA for property and financial assets.  It can be refused for any reason or for no reason with impunity.  Therefore, it can be the weakest of documents. Now that many banks are typically part of a large national holding company, the general form of POA for property doesn’t have to be accepted.  Many banks will not accept a POA which was given to a spouse more than one year ago, and many national financial brokers will accept no POA for property that is not on their own current form, which may be changed at any time without notice. Title Insurance Companies also may not accept a POA that is over one year old and that doesn’t describe the real property by Lot and Block.

3.   No Instructions: It contains no instructions about how to manage your assets and what to do with them.

4.   May Not Avoid Guardianship: If it is not accepted, the need for a conservatorship and/or guardianship proceeding arises. Neither you nor your family wants this to happen.

5.   Does Not Work After Death: It doesn’t work after your death so it doesn’t avoid the court proceedings on your death called “probate.”


Problems with Wills

 Wills take effect only on your death.

 Wills don’t apply to a lifetime mental disability. Wills can create the necessity for “lifetime probate” (conservatorship and guardianship).

 Wills only apply to assets owned by you alone that don’t pass by “operation of law,” such as joint tenancy assets, life insurance, and beneficiary-designated assets. Upon the death of the second spouse real estate and other assets owned by the spouse must be probated. If real estate is owned in more than one state, more than one probate will occur. This event is both a huge hassle for the family and involves significant and needless expense. Wills generally assure probate for some assets and can help create expenses, legal fees, and time delays.

  Wills are public with a lack of privacy.

 Wills don’t necessarily fit all the different estate planning situations and goals. They often are not customized to your overall estate planning needs.

 All wills are not created equal. There is a difference in quality.

 Wills don’t provide estate preservation from creditors and predators of your adult or minor children and grandchildren.

 Wills don’t make it as easy as trusts to do overall planning: death tax planning, business planning, income tax planning, and “generation-skipping” planning.

 Will planning doesn’t always include a review of assets and how they are titled.  In other words, the entire plan is not coordinated.

 Changes of wills must be signed with the formalities required by law.







Marquardt Law Firm, P.C.

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