When constructing an estate plan, there are a number of considerations that must be made. Individuals and families in Texas must determine how they wish their wealth to be distributed after their deaths and then determine which estate planning tools are best suited to reach their desired outcomes. Each scenario is unique, but there is a solution to fit virtually every set of needs. When creating an estate plan, it is very important to avoid errors that can derail even the best-laid plans.
One of the most common mistakes that individuals make is selecting joint ownership during one’s lifetime. People will often decide to add a child or other loved one as a joint owner on bank accounts, personal property or other assets in the belief that the transfer of assets will be simpler when the time comes. In some ways, this is true. Property that is jointly owned will be eliminated from the probate process, and the joint owner will experience no delay in his or her ability to access jointly-owned assets.
The problem, however, lies in the wide range of unknowns that can threaten those assets. Many people are unaware that jointly owned property is susceptible to loss if one of the owners is faced with a lawsuit, unpaid taxes or bankruptcy. Another consideration is the possibility of divorce, which creates a scenario in which the spouse of a loved one could be entitled to half of his or her share of jointly-titled assets.
A better estate planning approach is to set up banking or investment accounts in such a way that the chosen heirs are named as beneficiaries. This will result in the assets passing directly to the heirs upon one’s death, outside of probate. If loss through a lawsuit, bankruptcy or divorce is a concern, a solution lies in the creation of a trust, into which assets can be placed. In that scenario, the assets are owned by the trust, not the Texas resident named as the beneficiary, and are, therefore, safe from loss to the risks outlined above.
Source: Consumer Reports, “Estate-planning minefields“, April 14, 2015