Estate planning attorneys are frequently asked a troubling question: what’s the quickest, cheapest, and easiest way to just avoid probate altogether? Of course, you can never expect an attorney to provide a blanket response to that question. It is similar to asking your doctor, “What’s the quickest, easiest, and cheapest way to avoid heart disease?” The answer in both cases will undoubtedly depend on many things. For the doctor to give an informed response, he or she would need to perform blood tests, get some idea of your history, lifestyle choices, eating habits, family history, and so forth.
The same is somewhat true of offering a comprehensive estate plan. It is, after all, designed to protect you and your family later. So, your attorney will likely need to know your net worth, what real estate you own, your relationship with your children, siblings, and other relatives, your goals, career, income, and your level of health. These are just a few of the issues that go into deciding how to properly establish your estate plan. This warrants discussion, because people continue to find themselves engulfed in painful litigation against their own family, often despite good intentions.
Every year many Americans are fooled into choosing quick fixes to “avoid probate.” In many ways, a complete misunderstanding of the probate process has perpetuated this mentality. In fact, web-based “self-help” legal services are often the worst culprit. But if handled properly by an experienced attorney, probate can be a powerful and straightforward process for settling a decedent’s affairs. Some sadly choose to simply open joint bank accounts with an adult child or close friend and then place all of their money in those accounts with simple instructions regarding how they want the money spent upon death. Many people also do the same thing with their homes, automobiles, and other types of property, thereby completely avoiding probate. But this is not a wise strategy.
Types of property ownership
There are several ways a person can hold title to property in America. First, they can own property individually, meaning it is solely in their name. They have 100% of the ownership interest, and upon death the property will pass to their estate to go through the probate process.
Second, one can also share ownership with other people as “tenants in common,” which means each person holds a one-half divided interest. So, people who own property this way can, depending on the nature of the property, generally sell their own interest without affecting the other owner’s rights. However, neither owner can simply take the whole asset and claim it absent the other owner’s permission.
Third, one can share ownership with someone as “joint tenants,” meaning that each person has an undivided 100% interest. This means either person holds a complete interest in the whole asset. Married people can hold property as tenants by the entirety, which closely resembles joint tenancy.
Later this week we will discuss joint tenancy–the benefits, pitfalls, and alternatives.