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Consider a married couple who chooses to buy a home together. They go through the loan process together, sign the closing documents, and move into it together. Now imagine that neither conducts any degree of estate planning, but one passes away unexpectedly. The question that most people have is what happens to the home and the accompanying loan. Though each state’s laws surrounding this issue will not be identical, the property is held as joint tenants.
Because of joint tenancy, each spouse has an equal interest in the property. When one spouse passes away, the surviving spouse inherits the property automatically by operation of law, without the need for an estate proceeding. (Although it is a separate discussion, the surviving spouse can keep making mortgage payments as scheduled. In this situation, the lender cannot call the loan and force you to pay it off in full.) When you understand joint tenancy, it should give you a level of comfort and protection. Furthermore, the property will not need to pass through an estate when you have a joint tenancy with rights of survivorship. It is essential to understand that joint tenancy has significant limitations and that having it does not replace the need to have an estate plan.
Why You Still Need to Have a Plan
Joint tenancy only protects you against a limited amount of circumstances. What happens when both spouses pass away in the same accident? If one spouse survives, what happens to the home when they ultimately pass away? Joint tenancy allows the house to pass to the surviving spouse without the need for probate, but that is not the case when the surviving spouse dies. If the home never went into a trust and a will was never written, it will likely be subjected to intestate laws. These laws dictate which relatives receive your assets.
Another thing to consider is blended families. Think of two people who have children from previous marriages. Look at the following chain of events:
- They marry one other.
- They purchase a home together.
- They never created an estate plan.
- The husband passes away, and the wife assumes ownership of the house.
- The wife passes away years later.
The wife could have drafted a will that left the home she now owns to the children from her first marriage. If she forgoes an estate plan, the house still goes to her kids. The reason is that foster children and stepchildren will only inherit assets if they were legally adopted, which is not an immediate byproduct of getting married.
Speak to the Estate Planning Attorneys at Drucker & Mattia, PLLC
Take control of your assets by ensuring you have a reliable and firm estate plan in place. In addition to the limitations we mentioned previously of relying on joint tenancy, there are also tax advantages to consider and take advantage of. Our attorneys will assist you with estate administration, probate, powers of attorney, living wills, and health care proxies. Contact our office to schedule your free initial consultation.
Drucker & Mattia PLLC
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