When it comes to estate planning, understanding the various legalities can be overwhelming. There are so many dynamics that go into proper planning and shortcuts just aren’t an option. Vermont estate planning laws are intricately detailed, but they’re written in ways to protect both your assets and your surviving family members. Our estate planning attorneys stand ready to provide legal assistance, but we also understand that our clients like to conduct their own due diligence. It’s a proactive way to provide peace of mind. This week, we take a look at the advantages and disadvantages of joint tenants with rights of survivorship.
Joint Tenants with Rights of Survivorship
In its most simplest form, joint tenants with right of survivorship, or JTWROS, is an account that has at least two owners. Those owners are afforded equal rights in terms of that account’s assets and upon the death of one account holder, the other account holders aren’t in jeopardy of losing whatever those assets might be. These accounts allow survivors to bypass probate, which is always a good thing, especially during one of the most stressful times of anyone’s life.
But, that’s not to say these joint tenants with rights of survivorship accounts are ideal for every situation.
Risks of JTWROS
There are capital gains taxes should the owners sell any of the assets. If the asset is deemed a joint tenancy with rights of survivorship, and if it is sold, it’s then that survivors may find themselves paying capital gains taxes on the appreciation. This can affect one’s estate planning efforts.
While the assets in the JTWROS have value, individually, owners cannot give away, transfer, or sell those assets without the approval of anyone else who shares the assets. In other words, it’s valuable in this context only if all owners are willing to follow along with the gifting ,selling, or mortgaging of the account. There are those instances, in some states, where one account owner could be forced to go along with other owners, especially if one’s actions jeopardize the assets of the other account holders.
There are other dynamics that can complicate these types of accounts. If an owner has credit problems or faces foreclosure or bankruptcy, it can jeopardize the JTWROS account. Divorces can also affect the account, especially if one partner in the marriage claims it as an asset. While that can certainly result in big problems for all of the account owners, the fact is, all of the account holders are in jeopardy, even if their bases are covered. They may have worked hard their entire lives and suddenly find themselves at risk. Worse, there’s little – if any – recourse. They often become the unfortunate casualty in these life events. No one account owner is obligated to protect the parties.
Another important reality is that if co-owners both die at the same time, such as a car accident, there could be legal battles associated with determining who passed away first. The tragedy becomes heavier when there are legalities associated with survivors and their rights when it comes to the joint tenants with rights of survivorship.
Unpleasant – but Necessary Estate Planning
The fact is, estate planning is never easy. It’s awkward, unpleasant, and uncomfortable – but most certainly necessary. Unsworth LaPlante, PLLC is committed to helping families work through these complicated legalities. The worst thing anyone can do is assume they can cover those bases without a bit of expert guidance. Our estate planning lawyers are committed to staying current on the ever-changing laws in Vermont. We also invite clients to attend any of the estate planning seminars in the area.
We invite you to explore our library of articles and schedule an appointment to discuss all of your estate planning options.