Monday, October 07, 2013
8 Dangers of Owning Property as Joint Tenants
Minneapolis Estate Planning Lawyer Cautions Clients on Joint Ownership of Property
One of the most common questions I am asked is whether someone should add another person to the deed to their home (or other property). Below I discuss some of the concerns I have with joint ownership of property.
“Joint Tenancy With Right of Survivorship” means that each person has equal access to the property. When one owner dies, that person’s share immediately passes to the other owner(s) in equal shares, without going through probate. We’ve all been told that Joint Tenancy is a simple and inexpensive way to avoid probate, and this is sometimes true. But the tax and legal problems of Joint Tenancy ownership can be mind-boggling. The dangers of Joint Tenancy include the following:
Danger #1: Only Delays Probate. When either joint tenant dies, the survivor -- usually a spouse or a child -- immediately becomes the owner of the entire property. But when the survivor dies, the property still must go through probate. Joint Tenancy doesn’t avoid probate; it simply delays it.
Danger #2: Two Probates When Joint Tenants Die Together. If both of the joint tenants die at the same time, such as in a car accident, there will be two probate administrations, one for the share of each joint tenant in the Joint Tenancy property as well as any other property they each may own.
Danger #3: Unintentional Disinheriting. When blended families are involved, with children from previous marriages, here’s what could happen: the husband dies and the wife becomes the owner of the property. When the wife dies, the property goes to her children, leaving nothing for the husband’s children.
Danger #4: Gift Taxes. When you place a non-spouse on your property as a joint tenant, you make a gift of property every time that joint tenant takes property out of the account. For example, when a mother retitles her $80,000 home in Joint Tenancy with her son, she makes a gift to her son every time he makes withdrawals. This may not be the most efficient use of her $14,000 annual exclusion. The main point is that the gift is unintentional and not well planned. Worse, Minnesota now has a state gift tax that requires the person giving a gift of more than $14,000 in a year to file a state gift tax return.
Danger #5: Right to Sell or Encumber. Joint Tenancy makes it more difficult to sell or mortgage property because it requires the agreement of both parties, which may not be easy to get.
Danger #6: Financial Problems. If either owner of Joint Tenancy property fails to pay income taxes, the IRS can place a tax lien on the property. If either owner files for bankruptcy, the trustee can sell the property even though the other joint tenant is not otherwise involved in the bankruptcy.
Danger #7: Court Judgments. If either joint tenant has a judgment entered against them, such as from a car accident or business dealings, the holder of the judgment can execute the judgment against the Joint Tenancy property.
Danger #8: Incapacity. If either joint owner becomes physically or mentally incapacitated and can no longer sign his name, the Court must give its approval before any jointly owned property can be sold or refinanced -- even if the co-owner is the spouse.
Monday, August 05, 2013
Minnesota Gay Marriage and the Fall of DOMA: Should My Partner and I Get Married?
A Minneapolis Estate Planning Attorney Discusses Minnesota's New Law Allowing Gay Couples to Legally Married
Gay Couples Can Legally Marry in Minnesota
On August 1 Minnesota will become the thirtheenth state to legally recognize same-sex marriages. Gay couples who decide to tie knot here will gain a variety of financial benefits and legal rights.
Some of the changes will be significant. Couples who marry and live in Minnesota will be able to file their state tax returns jointly. Couples who decide to marry will also be first in line to inherit their spouses’ assets, even in the absence of a will. They’ll gain an array of smaller benefits as well, down to the ability to jointly apply for a fishing license.
The Supreme Court Declares DOMA Unconstitutional
Further, the Supreme Court held that the section of the Defense of Marriage Act ("DOMA') withholding federal benefits from legally married same-sex couples was unconstitutional. What does that mean?
This means that same-sex couple who are able to legally marry may not be denied the federal benefits provided to married heterosexual couples.
If you are thinking about getting married in Minnesota, or in one of the other jurisdictions in which gay marriage is legal, you need to think about how your new status as a married couple may affect your family with regard to both obligations and benefits. Further, if you are already legally married in another jurisdiction, that marriage will automatically be recognized here in Minnesota. In other words, if you got married in Canada but live here, that marriage became legally valid in Minnesota at 12:01am on August 1, 2013.
I have a client who was legally married in Canada a few years ago and she said to me, "So, basically I just have to wake up on August 1 and we are legally married, right?"
I think that's a great way to phrase it.
But what does it mean
Many clients have called me to ask about how getting married may affect their estate plans - or other issues related to their day-to-day lives. This is, for our community, unchartered territory and so many people are filled with questions. These new laws affect, in part, the following things:
Responsibility for financial support for a spouse
Responsibility for decisions relating to medical care and treatment
Priority for appointment as conservator, guardian, or personal representative for a spouse
Inheritance rights upon the death of a spouse
The ability to designate a spouse automatically as a beneficiary to retirement
The ability to insure a spouse through most insurance policies (except for those governed by federal law – see next question below)
Survivor benefits under workers compensation laws and state or local government pensions
Presumptions of parentage for children born during the marriage
Marriage also provides for an orderly process for dissolution, spousal maintenance, parenting time, and other protections granted through the divorce process
If you have questions on these, or any other issues, related to the new gay marriage laws, feel free to contact Unique Estate Law to discuss them at your convenience.
Thursday, February 07, 2013
Estate Planning Lessons, Part 1: Ownership of Property in Another State
As noted in a prior post, the year 2012 was a difficult one for me personally with the loss of both my parents. It has been emotional and trying to deal with the losses and then, on top of that, try to work through their estates with two different sets of family. This is the first post conveying some of the lessons I've learned in my continuing attempt to educate others about the need to work with someone to properly plan your estate.
Even the family of an estate planning attorney can be unprepared for an unexpected event. A week before my father's death I found out that he owned property in North Dakota. It turns out that my great grandfather had land there and divided it up between his children who did the same all the way down the line so that now my siblings and I own a piece of North Dakota land. At least we will own it once we go through the probate process and have the deed changed to our names.
You may think "Well, you're an estate planning attorney so can't you just take care of that?" Unfortunately for us, I can't as I'm not licensed in North Dakota. So, now we will need to hire a North Dakota attorney several thousand dollars to get the property into our names. No, the irony is not lost on me.
So, this post is to urge you to talk to your loved ones about what you own or ask what they may own so that you can properly manage things now before it's too late. If I would have known about the North Dakota property earlier, I would have urged my Dad to get a trust and deed the property into it so that we would now be able to avoid the hassle, expense and pain of going through probate in another state.
Monday, November 05, 2012
Minnesota Transfer on Death Deed, Part 4:Can You Cancel a Transfer on Death Deed After It's Filed?
In this series of posts, we've been discussing transferring a home via a transfer on death deed. You own property in your name alone and want to be sure that it goes to the beneficiary of your choice without the expense and delay of probate. So, after reading these informative blog posts, you decide to use a Transfer on Death Deed (“TODD”) to achieve this purpose.
But what happens if you change your mind after you have executed and filed the deed with the county? Can you cancel or change the TODD?
Yes. The Deed does not do anything to your rights over the property during your lifetime. It only takes affect upon your death. Therefore, nothing is set in stone until after death. You may, at any time, change the beneficiary or cancel the deed altogether. But, you MUST file the transfer on death deed revocation prior to your death.
Monday, October 29, 2012
Minnesota Transfer on Death Deed, Part 3: How Do You Get One?
Twin Cities Estate Planning Attorney Explains the Steps Necessary to Use a Minnesota Transfer on Death Deed
If you are a property owner and wish to use a transfer on death deed (“TODD”) to transfer that property without the hassle of probate, you must
Choose a beneficiary or beneficiaries
Execute a valid deed that expressly states that it is effective only upon your death
Record the deed in the county in which the property is located prior to your death.
Pay the filing fee.
A few things to note. If the property is jointly owned then all owners must sign the deed. And as #3 above states, it is not enough to execute the deed - you must also record it with the proper county before your death.
Wednesday, October 17, 2012
Minnesota Transfer on Death Deed, Part 4: Can You Change Your Mind?
We've been discussing the benefits of using a Minnesota Transfer on Death Deed to transfer your home to another person at your death. You own property in your name alone and want to be sure that it goes to the beneficiary of your choice without the expense and delay of probate. So, you decide to use a Transfer on Death Deed (“TODD”) to achieve this purpose.
Can you cancel a Minnesota Transfer on Death Deed?
Yes. The Deed does not do anything to your rights over the property during your lifetime. It only takes affect upon your death. Therefore, nothing is set in stone until after death. You may, at any time, change the beneficiary or cancel the deed altogether.
Monday, October 15, 2012
Minnesota Transfer on Death Deed: Should I Use it To Transfer My House?
Minnesota Estate Planning Attorney Discusses the Benefits of Using a Transfer on Death Deed to Transfer a Home
Minnesota has a unique tool to for use in avoiding probate known as a Transfer on Death Deed (“TODD”). In 2008 Minnesota’s legislature passed a law that allows the owner of real estate to execute a deed naming a beneficiary who, upon the current owner’s death, will succeed to ownership of that property.
There are several benefits to using a Transfer on Death Deed to transfer real property to someone.
You Retain Your Ownership Interests. The property is not transferred until the your death. So, you retain full ownership of the property during your life. So, you may choose to remain living in the home, sell it, borrow against it or give it away without restriction.
Your Home Is Still Protected. The finanacial obligations of the beneficiary will not affect your rights to the property. This is because the beneificary does NOT have any "present interest" in the property so if he/she has any legal actions such as bankruptcy, lawsuits, or divorce that are brought against the beneficiary won’t affect the property. This offers you a lot of protection in leaving the property to someone who may not be the best at managing money as a creditor may NOT file a lien against property subject to a transfer on death deed.
Your Heirs Will Avoid Probate For That Home. Again, this is probably the main reason why people choose a Transfer on Death Deed. The real estate won’t be subject to the costs and time of court probate proceedings- the beneficiary simply submits an affidavit and death certificate with the county recorder. This allows the home to transfer to the beneficiary quickly and inexpensively. It allows avoids the "ease of contest" often found in probate procedures.
You Can Revoke It. This means that you can change or delete the beneficiaries named in the document, even without their consent. Names can be deleted or added as the you sees fit. Or, you can revoke the entire document and dispose of the property in another manner (e.g. sell it or put it into a trust).
You Have Not Given a Gift. Because you are not giving the beneficiary a present interest in the home, there is no gift. This avoids issues with having to file a gift tax return or potential problems if you end up needing medicaid (medical assistance) in the future.
As these come up quite often in my practice, whether between partners or parents and children, I will address the different aspects of Transfer on Death Deeds in a series of future posts.
From within Hennepin County Unique Estate Law represents estate planning and elder law clients throughout Minnesota, including Minneapolis, Edina, Bloomington, St. Louis Park, Minnetonka, Plymouth, Wayzata, Maple Grove, St. Paul, and Brooklyn Park. The Minnesota law firm of Unique Estate Law focuses on all aspects of estate planning, including specialized wills, trusts, powers of attorney and medical directives for married couples, young families, blended families, single parents, gay families and those going through a divorce. Unique Estate Law also handles probate administration, asset protection, Medical Assistance planning, elder law, business succession planning, adoptions and cabin planning.