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VIDEO TRANSCRIPT:
Hello, everyone. This is Robert Mansour and today I'd like to talk to you about putting your children on your bank accounts, on your real estate, et cetera. A lot of people try to handle their estate planning matters by basically adding children to their account. For example, somebody in their 60s or 70s might add their 30-year-old or 40-year-old daughter or son onto a bank account, an investment account, or sometimes they'll put the children on the real estate, on title with them. The thinking behind that is, well, with respect to bank accounts, they figure, well, this way the child can write checks, the child can make withdrawals, make deposits, et cetera. The problem with that is that whenever you add a child to a bank account or an investment account or real estate. You have effectively added a bull's eye to that asset. How does that work? Let's say that son or daughter gets in any kind of trouble. Let's say they're going through a divorce. If they're going through a divorce, it is conceivable that the attorney for the soon-to-be ex spouse decides that they want a piece of that account, or they want a piece of that investment, or they want a piece of that real estate. The next thing you know, you're owning that asset with an ex son-in-law or an ex daughter-in-law, or you have to give them a portion of that. Why? Because your son or your daughter is on the account. That means that they own the account, just like you. Let's say they get into some kind of creditor problems or a bankruptcy or a law suit. They're driving down the street one day and they hit a little boy on a bicycle. The next thing you know, that little boy's family is coming after your son or daughter, and everything with their name on it, including your asset. Sometimes you have to ask yourself, "Am I creating more trouble by adding somebody to my account?" There are other ways of handling this, and there's other avenues that you can pursue with a proper estate plan. Sit down with an attorney and come up with a plan that protects you, but also allows your children the tools, or gives them the tools, rather, to assist you if they have to. This is Robert Mansour, thank you for watching. Here is the transcript from the video:
Hello everyone. This is Robert Mansour. I'm an attorney in the Los Angeles area and we're going to spend a few minutes talking about five easy things you can do to protect your family today. This doesn't even require going to a lawyer. You can do these things on your own and we'll walk through five things that you can do to protect yourself and your family. If you want to learn more about my office you can go to my website which is right there on the screen, www.mansourlaw.com. My office is 661‑414‑7100. Let's begin. If you have any assets that are in your name alone you want to make sure you get yourself a will. People say well what is a will? What is the legal significance of a will? A will is just basically a letter to the judge telling the judge where you want your assets to go after you pass away. So that's all it really is and also a will only goes into effect after you pass away. It's really of no legal significance and no legal use while you're still alive. You can name guardians for minor children as part of your will. If you want to get a free California will and you don't want to go to a lawyer and you don't want to get a more robust estate plan that might include a living trust etcetera, you can go to www.calbar.org. On the left-hand side search for the public forms and you will find a free California will available for you with instructions on how to fill it out and you can have it witnessed by two witnesses which is the requirement here currently in California and keep in mind though a will is not a panacea. A will is not going to solve all your problems and in fact a will is to some extent a limited document. But if you don't have one and you can get one for free, why not? Check it out at the California Bar Association. Let's go to Step 2. Step 2, check the beneficiaries on your life insurance policies and tax deferred accounts. So remember I talked about a will. A will controls assets that are in your name alone. However there is a lot of things you might have like life insurance policies and tax deferred accounts like IRAs and 401Ks and 403Bs. Those things pass by way of a designated beneficiary. When you got those things you probably filled out a form called a beneficiary form. So it doesn't matter what your will says. Basically what matters is what that form says. So a lot of married couples for example will find that they have their spouse listed but when they review these beneficiary designations they find that they often forget to put somebody beyond the spouse. They don't put their children. They don't put their sisters or brothers or whoever they want the asset to go to. So in the event of a common accident, the husband and the wife pass away and now we're stuck because there are no other beneficiaries listed on the form. So not only do you want to check who your primary beneficiary is but you also want to check who your secondary beneficiaries are. Now, if you have minor children and in California that's people who are under the age of 18 are considered minors, you want to be very careful and you may not want to name them as the secondary or contingent beneficiaries. You may want to name a living trust as the beneficiary in the case of minor children. But if you want to learn more about that you can visit my website or give me a call. I'll be happy to explain that further. Also if you have beneficiaries that you might have a concern about how they would handle the money you may not want to name them directly. But at the very least check who you have and make sure that it's correct and make sure that you name individuals and don't put something like my estate shall be the beneficiary. That's inviting trouble right there. Next is Step 3 here. We're going to get an advance health care directive. Get an advance health care directive. Now why is that important? An advance health care directive allows somebody to make health care decisions for you if you cannot. Not only that, they can be your advocate. They can advocate for you in the hospital setting or, you know, let's say for example the hospital staff is not paying attention to you or the nurses are not helping you or they're giving you the wrong medication or whatever the case may be, or you need to be relocated from one facility to another. Your agent under the healthcare directive can advocate for you and make those kinds of decisions. Also the health care agent can decide whether or not, you know, life support should be extended, whether or not, you know, a certain surgery that is being recommended should be done or not. People often think that their spouse is automatically entitled to do this. That is an incorrect assumption. One must be given the legal authority to act via an advance health care directive. Some states in the U.S. still call this thing a living will, but in California we call it an advance health care directive. You can get an entry level form from the California attorney general's office. Just look them up on the internet. Look up the California attorney general, type in the search box advance health care directive and you'll find a free form that is entry level but it's better than having nothing so go ahead and get that in place and empower whomever you want. Make sure you list a primary agent and also one or two secondary agents. Next is Step 4. Examine how you hold title to your assets. Take a look at everything that you own and ask yourself how do I own that asset? Do you own it as a single individual? Do you own it jointly? Do you own it as joint tenancy, tenants in common? Do you own it in a living trust? Do you own it in your name alone? All of these things have legal ramifications. This is not just something to toy with. You really have to examine this and ask yourself is that really the way I want to hold title to my asset? So if you want to discuss that further you might find some good resources on my website or give me a call and I will explain to you the ramifications. One ramification that we could talk about is joint ownership. Joint ownership is when you own property jointly with other people and that's fine. There's nothing wrong with holding property jointly with other people but what happens is if one person passes away, the other person is now the owner of that property and if they add another person and then they pass away then that third person now owns the property. Basically this is one of the easiest ways for people to lose their assets in this country. Joint ownership is one of the leading causes of disinheritance, people losing their wealth to other people because they put others on title with them and the property and the asset mysteriously ends up in the wrong hands. So make sure you take a very close look at how you hold title to your assets. Step No. 5, review your insurance policies. Now I don't sell insurance and I'm just telling you this because I have seen time and time again people getting burned because they did not have adequate insurance. Sometimes clients come to me and they say, well we don't have a lot of money and we're not sure if we should do an estate plan. We've got these little kids, etcetera. I say look, go get yourself a big life insurance policy. If you pass away a lot of money can be passed onto your children to help them with college, to help them with paying the mortgage, to help the kids with, I don't know, day care. You name it. They're going to need that money and so you want to make sure you have adequate life insurance. So talk to somebody who knows what they're talking about and get yourself some really good life insurance especially if your estate is going to need a lot of cash in order to deal with a catastrophic situation. Also you want to take a look at your auto insurance policies. Do you have enough insurance? A lot of people don't have enough insurance on their car insurance policies and they end up getting in horrific car accidents and there's not enough money there for the family. They generally rely on the responsible party, the person who caused the accident, but guess what? 25 percent of the time that person is either not going to have enough insurance or not have any insurance at all so you want to make sure that you have the adequate car insurance not only for liability but also for something called uninsured motorist and underinsured motorist. Make sure you check your life insurance policies and your auto insurance policies and your homeowners insurance because so many people have basically gone from great wealth to nothing because of a catastrophe and they didn't have the adequate insurance policies. And that's been five easy things you can do to protect your family. My name again is Robert Mansour. Thank you for watching this short video. I hope you found it helpful and if you did please pass it along to others. Again these are five things that you can do on your own with a few phone calls, talk to a couple of professionals in your life, your insurance broker, if you have an attorney you want to talk to them to get more information that's fine. Or you can call my office and get more information as well. Thank you very much for watching. by Robert Mansour
Let me preface this by reminding readers that I am NOT a CPA or any sort of accountant. That being said, sometimes people don't realize that one of the problems of adding a joint tenant to an asset is you might be unwittingly gifting them your cost basis in the asset. That means when the joint owner wants to sell the asset in the future, they might have to pay much higher taxes than they otherwise would have if they had simply inherited the property. For example, let's say you bought a home many years ago for $100,000. Then you add a child to title as a joint tenant. Your reasoning might have been that you want the child to get the house when you die. That will indeed happen because the last surviving tenant gets the asset. However, let's assume the child sells the house for $600,000 when you die. The child has to pay taxes on the gain from $100,000 to $600,000 - all because they absorbed your cost basis in the property when you added them as a joint tenant. It would have been better to inherit the house in many cases. This is true with other assets subject to a cost basis like investment accounts. There are occasions when adding a joint tenant makes sense, but you've got to run the scenarios by a CPA and lawyer. You can't just do it because all your friends say it's a good idea. Your friends could be wrong. Also, there are other bigger dangers to consider when adding people as joint owners to assets. Joint Tenancy is one of the main reasons for "unintentional disinheritance" in this country. I just got a call from a lady who is one of 4 kids. Her father died many years ago, and her mom remarried three years ago. Her mom just died, and guess who owns all the assets? The NEW husband! Guess what? He doesn't feel like sharing!
Joint Ownership can be VERY dangerous. Santa Clarita estate planning lawyer Robert Mansour can help you get your legal affairs in order. So many people own assets as “joint tenants.” However, joint tenancy may cause more headaches than you realize!
With such a strong focus on home ownership, we should take a moment to address the issue of legal title. Most people have legal title to their home in joint tenancy – two or more persons own the home together as “joint tenants.” Legally, that means when one person dies, all of the deceased owners’ interest in the property is transferred immediately to the surviving owners. Therefore, if John and Mary own property in joint tenancy, and John dies, then Mary owns the entire property outright. While certainly a convenient method of ownership, there can be some unexpected costs. Here are some things to think about when it comes to owning assets (such as your home) in joint tenancy: Some married couples and others see Joint Tenancy has a probate avoidance tool. After all, if they own property together, there is no need to go to court if someone dies. Joint Tenancy with your spouse may avoid probate on the first death, but not the second. You are not “avoiding” probate but simply “postponing” it. This may expose your family to thousands of dollars of unnecessary court costs, not to mention the time it takes an asset to make its way through the court system. Sure you could keep adding joint tenants, but there may be unfavorable tax consequences, not to mention family squabbles. Joint tenancy doesn’t mean you are necessarily going to avoid probate court. While you may avoid probate on a specific item of property, you still may end up in probate with respect to other items. In other words, you end up in probate court anyway which is exactly what you were trying to avoid in the first place. Once in probate court, a judge could order that all assets be preserved and/or unsold until the entire matter is settled. You may also have less control over the property if it is held in joint tenancy. After you pass away, you really have no say in what happens to the property. Property owned by the surviving joint tenant will pass to that tenant’s heirs, which may not be appreciated by the decedent’s relatives. This sometimes leads to “unintentional disinheritance.” Unintentional Disinheritance: In this author’s estimation, this is the scariest result of joint tenancy. For example, let’s say that Mary and John own prime Los Angeles real estate worth $850,000 in joint tenancy (as many people do). They have no kids, and they have not prepared a will. One day, Mary passes away in a car accident. The property is then entirely John’s as the surviving joint tenant. So far, so good. However, John dies a year later. The property then goes to John’s mother who inherits under California law. Mary’s family is out of luck. They receive $0 of the $850,000 house. You see, joint tenancy trumps even if there is a will saying otherwise. It gets even worse if the surviving spouse finds a “new love.” What if John married the gorgeous “Suzy” after Mary’s death and puts Suzy as his joint tenant? In that case, if John died, Suzy gets everything. Both Mary’s family and John’s family are out of luck (which could be even more problematic if John and Mary had kids). Don’t let “Suzy” do this to your family! Remember, with joint tenancy, “last person standing” gets the property outright…and they may not feel like sharing. Some people put their adult children on title with them as joint tenants. The parent’s logic is that by doing so, they allow the house to pass to their children more easily upon the parent’s death. However, owning assets with adult children is usually a bad idea. Why? First, if there is a divergence of opinion regarding the asset, it can cause real strife between parent and child. Second, joint tenancy may also lead to unintended beneficiaries, such as creditors of the child or a divorcing spouse who suddenly has an interest in your home! Putting adult children on title may be deemed a gift by the Internal Revenue Service for which there may be taxable consequences. Anytime you add someone’s name to an asset, you are effectively adding a “bull's-eye” to that asset. If you own property in joint tenancy, you may be exposing the asset to creditor claims. They don’t even have to be your creditors. If one joint tenant gets into trouble, the entire property may be placed in danger. Why would you want to expose your home or bank account to additional potential liability? Also, putting an adult child on real estate title as joint tenant may cause a big capital gains tax problems. For example, let’s say your parents bought their home in 1968 for $50,000. It is now worth $600,000. If your parent puts you on title, you then absorb your parent’s cost basis which can mean big tax consequences when you come to sell the property. You would have to pay taxes on the gain of $550,000. If your parents’ property were held in a living trust, you could inherit the property and sell it soon after, generally without any tax consequence since you would get a step-up in the cost basis. In the above example, you would get the house via inheritance valued at $600,000. You sell it the following week for $600,000 and there are no taxes due because there was no “gain.” Even if a married couple holds their residence in joint tenancy, it is possible that more capital gains tax may be due upon a sale than otherwise necessary because only half of the property receives a new cost basis upon one spouse’s death. Joint Tenancy can also lead to family disagreements. All owners may not be in agreement about what to do with a piece of property. For example, let’s say three siblings own property as joint tenants. Two children may want to sell property because they need money or are tired of paying the property taxes. The remaining child doesn’t want to sell. In fact, he wants to live in the house forever and have the siblings share the property taxes and other maintenance costs. This happens more often than you think, and children end up in court. Joint tenancy is also difficult to change. Also, once you add a joint tenant to your property, you can’t simply take them off the title. They have to agree to it, which may also lead to unnecessary strife. Therefore, owning property in joint tenancy may be an easy solution at first. However, it may prove to be a poor choice in the long run. Consult an estate planning attorney to see if joint tenancy is right for you, or if some other form of ownership may be more advantageous. You may have to think several steps ahead, but that is what planning is all about. Joint ownership is not the best way to hold title to assets in many cases. Check out this short 5 minute video that discusses the pros and cons of Joint Tenancy. If you want to learn more, call my office to discuss.
http://www.youtube.com/watch?v=twdgThRRoRE Joint ownership is not the best way to hold title to assets in many cases. Check out this short 5 minute video that discusses the pros and cons of Joint Tenancy. If you want to learn more, call my office to discuss.
http://www.youtube.com/watch?v=twdgThRRoRE |
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