Estate Planning

Not really. Using joint ownership usually just postpones probate. With most jointly owned assets, when one owner passes away, full ownership does transfer to the surviving owner without probate. But if that owner passes away without adding a new joint owner, or if both owners pass away at the same time, the asset must be probated before it can go to the heirs.
 
Watch out for other problems. When you add a co-owner, you lose control. Your chances of being named in a lawsuit and of losing the asset to a creditor are increased. There could be gift and/or income tax problems. And since a will does not control most jointly owned assets, you could disinherit your family.
 
With some assets, especially real estate, all owners must sign to sell or refinance. So if a co-owner becomes incapacitated, you could find yourself with a new “co-owner”—the court—even if the incapacitated owner is your spouse.

1. Probate can be expensive. Legal fees, executor fees and other costs must be paid before your assets can be fully distributed to your heirs. If you own property in other states, your family could face multiple probates, each one according to the laws in that state. Since these costs can vary widely, it would be a good idea to find out what they are now.
2. Probate takes time.  During part of this time, assets are usually frozen so an accurate inventory can be taken. Nothing can be distributed or sold without court and/or executor approval. If your family needs money for living expenses, they must request a living allowance, which may be denied.
3. Your family has no privacy. Probate is a public process, so any “interested party” can see what you owned, whom you owed, who will receive your assets, and when they will receive them. The process “invites” disgruntled heirs to contest your will and can expose your family to unscrupulous solicitors.
4. Your family has no control. The probate court process determines how much it will cost, how long it will take, and what information is made public.

Probate is the legal process through which the court sees that, after you pass away, your debts are paid and your assets are distributed according to your will. If you don’t have a valid will, your assets are distributed according to state law.

If you have a living trust, you will also need a “pour-over” will that acts as a safety net if you forget to transfer an asset to your living trust. When you pass away, the pour-over will “catches” the forgotten asset and sends it into your trust. The asset may have to go through probate first, but it can then be distributed as part of your overall living trust plan. A guardian for minor children must also named in a will.

If you have a living trust, and you and your spouse are co-trustees, either can act and have instant control if one of you becomes incapacitated or passes away. If something happens to both of you, or if you are the only trustee, the successor trustee you personally selected will step in. If a corporate trustee is already your trustee or co-trustee, they will continue to manage your trust for you.
 
If you become incapacitated, your successor trustee looks after your care and manages your financial affairs for as long as needed, using your assets to pay your expenses. If you recover, you resume control. When you die, your successor trustee pays your debts, files your tax returns and distributes your assets. All can be done quickly and privately, according to instructions in your trust, without court interference.
 
Successor trustees can be individuals (adult children, other relatives, or trusted friends) and/or a corporate trustee. If you choose an individual, you should also name some additional successors in case your first choice is unable to act.

A living trust is a legal document that, like a will, contains your instructions for what you want to happen to your assets when you pass away. However, unlike a will, a living trust can avoid probate at death, control all of your assets, and prevent the court from controlling your assets if you become incapacitated.
 
When you set up a living trust, you transfer assets from your name to the name of your trust, which you continue to control. For example, you would transfer the property from “Bob and Sue Smith, husband and wife” to “Bob and Sue Smith, trustees of the Smith Family Trust, dated (month/day/year).”
 
Legally you no longer own anything; everything now belongs to your trust. There is nothing for the courts to control when you pass away or become incapacitated. However, you keep full control of the assets you place in the trust. As trustee of your trust, you can do anything you could do before—buy and sell assets, change or even cancel your trust. That is why it’s called a revocable living trust. You even file the same tax returns. Nothing changes but the names on the titles.
 
The concept is simple, but this is what keeps you and your family out of the courts.