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Advice & More February 2018

Legal Ease

Probate Avoidance – Oh, What a Tangled Web of Problematic Possibilities

By Jonathan J. David

Dear Jonathan: My husband recently died and since we jointly owned all of our assets, there was no probate estate. It was quite a relief to avoid having his estate go through probate. I would like my estate to pass directly to my daughter and my son without having to go through probate first. Consequently, I am thinking of adding my daughter’s name to the title of all of my assets making her a joint owner. It is my understanding that if I do this then, upon my death, all of my assets will be owned by my daughter without the necessity of probate. My daughter has agreed that upon my death
she will split the assets with her brother. Is there any reason why I should not do this?

Jonathan Says: Yes. Adding your daughter’s name to the title of your assets may help your estate avoid probate, but it could create a host of other problems. First of all, if you don’t use the proper terminology when adding your daughter’s name to the title of your assets, you will inadvertently create a tenancy in common with your daughter. A tenancy in common means that each of you will own a one-half interest in those assets and as a result, upon your death your one-half interest will need to be probated. 

Further, even if you title the assets correctly so that those assets will be owned outright by your daughter upon your death without first having to go through probate, if she were to predecease you, then you, as the survivor, will once again be the sole owner of those assets and those assets will need to be probated upon your death.

Besides the above-referenced problems, putting your daughter’s name on the title of your assets could be problematic for several reasons including the following:

  1. If your daughter gets divorced after your death but prior to her dividing the assets with her brother, those assets could get tangled up in her divorce and become part of the marital settlement.
  2. If your daughter dies prior to dividing the assets with her brother, those assets will pass as part of her estate and unless her brother is a beneficiary of her estate, he will not get a share of those assets.
  3. Your daughter will be taxed on the income earned by assets between the date of your death and the date your daughter splits the assets with her brother.
  4. When you add your daughter’s name to the titles of your assets, you are in effect making a gift to her of one-half of the value of those assets and you will incur a gift tax on the amount of that gift in excess of the annual gift tax exclusion amount, which is currently $14,000. You will also be required to file a gift tax return with the IRS to report the gift. Your daughter will have to deal with the same issues when she divides the assets with her brother.
  5. Your daughter will legally own of all of the assets upon your death and as a result she will not be legally obligated to share any of those assets with her brother.

There are better ways to achieve probate avoidance that you should consider. One of those ways would be for you to create a trust during your lifetime which, upon your death, divides the trust assets between your son and your daughter in equal shares. In order for your assets to avoid probate, however, you will need to either transfer your assets to the trust during your lifetime or for certain qualifying assets, you can name the trust as the beneficiary to receive those assets upon your death. By taking these steps, not only will those assets avoid probate at your death but all the potential complications referenced above will be avoided.

I recommend that you meet with an estate planning attorney who can review this with you in more detail and make appropriate recommendations to you. Good luck.


Jonathan J. David is a shareholder in the law firm of Foster, Swift, Collins & Smith, PC, 1700 East Beltline, N.E., Grand Rapids, Michigan 49525.

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