Estate Planning Nuances - Trusts, Probate, TIC, JTWROS, etc

[Echard]

The estate planning laws may change in the next few years. Right now, the federal estate tax exemption is $13.61M. So a couple could have up to a combined $27.2M before having to worry about estate taxes.

As a result, many people have foregone the strategy of using trusts, especially in states with no estate taxes. While some funds will still have to go through probate, the actual process of probate may not be that bad for many people.

Of course, this could all change if the estate tax exemptions are changed in the next few years. One question that came up in discussion is what happens to Tenant In Common accounts when one spouse dies. Is the other spouse locked out of that account for the duration of the probate process? Can they not even change asset investments? Or can they just not withdrawal anything? Or, can they withdrawal up to 50% of the account, ie. their TIC ownership?

I'd also be interested to hear if many folks ditched their trusts in the last few years.

 

[mathjak107]

unbeknownst to us , when we did our estate planning decades ago. new york had a very low threshold at that time for the estate tax exclusion and if one went over by just 5% you didn’t pay on the overage .

you lost the entire 1 million dollar exclusion totally .

it’s still like that even though new york is the same as the federal level now . the tax cliff is still in place but it’s at a higher level today .

so at that time our attorney set us up with disclaimer trusts .

very unique trusts in that they are totally transparent.

after the death of one of the parties the surviving spouse has up to 9 months to activate a trust that splits the estate in two allowing 2x the threshold .


i hope we need it one day but i doubt we will go over even the normal limits

 

[OldShooter]

There are many kinds of trusts. I could probably list ten off the top of my head. Sorry, WADR as stated your question has little meaning.

 

[MichaelB]

One question that came up in discussion is what happens to Tenant In Common accounts when one spouse dies. Is the other spouse locked out of that account for the duration of the probate process? Can they not even change asset investments? Or can they just not withdrawal anything? Or, can they withdrawal up to 50% of the account, ie. their TIC ownership?

I'd also be interested to hear if many folks ditched their trusts in the last few years.

Good question. I’m not a lawyer, but my understanding is Tenant in common has a predetermined share of ownership and does not have right of survivorship. A will determines who gets ownership of the asset when one owner dies.

Joint tenant (with rights of survivorship), while both are alive each is assumed to own 50% and when one owner dies the other gets 100% ownership of the asset.

Probate law in the state determines if an asset needs to pass through probate before the surviving partner can withdraw or act on. Most states allow some assets and funds to go directly to a joint surviving spouse without probate, but there are strict limits.

 

[mathjak107]

one needs to consult not just an attorney but a good estate attorney in their state .

many states will take a home which is a protected asset and not countable towards the spend down under a certain value if medicaid is needed , and unprotect it in a revocable trust to where it counts in the spend down .

people put their homes in revocable trusts only to find out in their state the home is subject to spend down to qualify for medicaid in the first place

 

[Echard]

Good question. I’m not a lawyer, but my understanding is Tenant in common has a predetermined share of ownership and does not have right of survivorship. A will determines who gets ownership of the asset when one owner dies.

Joint tenant (with rights of survivorship), while both are alive each is assumed to own 50% and when one owner dies the other gets 100% ownership of the asset.

Probate law in the state determines if an asset needs to pass through probate before the surviving partner can withdraw or act on. Most states allow some assets and funds to go directly to a joint surviving spouse without probate, but there are strict limits.

Yes. But the unclear issue is what happens to the half of the Tenant In Common account owned by a surviving spouse during probate for the dead spouse. Does the surviving spouse have access to those funds? This is potentially an issue for anyone who has TIC accounts, instead of JTWROS accounts, and the account will go through probate. Big big question.

 

[Sunset]

Yes. But the unclear issue is what happens to the half of the Tenant In Common account owned by a surviving spouse during probate for the dead spouse. Does the surviving spouse have access to those funds? This is potentially an issue for anyone who has TIC accounts, instead of JTWROS accounts, and the account will go through probate. Big big question.

I think probate is a problem in many places, especially IL, it can take over a year plus costs $$$ to do it.

We avoid it in a few ways by: TOD/POD beneficiaries. Joint ownership of house.

If you think TIC is a problem, change it to Joint ownership.

I don't see how the Federal limits affect any of this as even the old low limits are pretty high, and in the end might mean some tax gets paid, doesn't affect probate lockup issue.