1. No creditor protection is available when property passes by joint tenancy.  Creditors come in many shapes and sizes these days.  Jury verdicts in even the most common accidents easily exceed insurance limits.  Aging survivors are more susceptible to lapses of concentration while driving or otherwise.  All of the survivor’s assets are exposed to creditors when assets are in joint tenancy.  A trust based plan can provide creditor protection to your spouse or your descendants.  This valuable protection can not be purchased at any price if you miss this planning opportunity.
2. Defeats an Estate Plan. Property in joint tenancy passes to the joint tenant even if your Will indicates a different result.  Heirs other than the joint tenant get nothing.  If the joint tenant tries to distribute property to other heirs there will be a gift tax consequence.
3. No estate tax protection for post-death appreciation is available if joint tenancy is used.  Although the asset will pass to your spouse estate tax free; upon the death of the survivor the entire estate is exposed to estate taxes and the tax exemption normally available to the first decedent will be lost.  If your estate (including life insurance) is likely to exceed the Applicable Exclusion Amount (scheduled to return to only $1,000,000 in 2011) then you have unnecessarily benefitted the government at the expense of your descendants.  However, if a “credit shelter” trust plan is utilized, the decedent’s estate, will escape taxation no matter how much it appreciates before the death of the surviving spouse.
4. Reduced protection from accumulated capital gains. Individually owned or community property receives a “step up” basis to fair value at the date of death and your heirs can sell the property and pay no capital gains.  If property is held as joint tenants, the joint tenant avoids probate, but receives the favorable “step up” basis treatment on only one-half of the property.
5. Lack of control. A joint tenant has no control over what happens to the property after death.  A surviving joint tenant can sell or transfer the property, or can pass it to the survivor’s choice of heirs, including subsequent spouses.  Joint tenancy deprives you of the assurance that your property stays in your bloodline.  Without any further planning, property owned by a surviving joint tenant will pass automatically to the heirs of the survivor.  If the survivor’s heirs are not the same as the decedent’s heirs, an undesirable result may occur.
6. Guarantees public probate proceedings. Although there will be no probate administration when the first joint tenant dies, then (unless the survivor creates a new plan) a public probate proceeding will be necessary to complete the transfer of the property upon the death of the survivor.
7. May subject you to expensive and potentially devastating results. Joint tenancy property is fair game for your joint tenant’s creditors.  Although you may have an opportunity to prove your property was placed into joint tenancy for convenience and that the property really does not belong to the debtor, you are exposed to the expense and uncertainty of litigation.

Don’t let any of these fatal problems befall your family.  Call our office today to discuss other, more reliable options for passing on your assets.

I am frequently asked why I emphasize keeping estate plans updated.  There are actually two answers to this question; the standard answer, and a more practical reason.  Both answers are true, but one is much more personal.
The standard answer to why update your estate plan comes in five related parts:

1. Laws Change. Federal estate tax laws change with uncomfortable regularity, especially when a new president takes office. State laws affecting estates change much less frequently, but still often enough to need regular review.
2. Circumstances Change. You have more children or grandchildren, minors become adults, you have more or less wealth to distribute.  Life is constantly changing and your estate plan must change with it.
3. Financial Powers of Attorney Become Stale.  Somewhere between 6 months to 3 years is the standard shelf life of a financial power of attorney, and courts and banks are reluctant to accept them after that.  Even if nothing else has changed, your Power of Attorney should be signed regularly refreshed.
4. You May Move to a Different Jurisdiction. Different states have different laws. Moving from one state to another requires a review and update of your plan.
5. Attorneys Get Better.  Just like you, attorneys are constantly learning and improving.  The advice we gave you five years ago was good.  The advice we have for you now is better.

These are the standard reasons to update your estate plan.  But there’s a better practical reason that is quite different and much more personal — it has to do with family.  Few of us are lucky enough to have a family dynamic that is structurally and emotionally functional. I have met some couples of modest wealth, in their first marriage, with responsible adult children; but I have met more couples who are: in second marriages, with blended families, with one or more child with destructive habits or tendencies, or worried about a son or daughter in-law (the “outlaws”) whose motives conflict with our own values.  For these families, change will come swiftly and be overwhelming; frequent reviews and updates will ensure that your estate plan keeps up with these swift changes and continues to function as you intended — protecting you, your spouse, and all your children, even if it is sometimes from themselves.