Page 26 - FOP June 2019 Magazine

The perils of joint tenancy
Joint tenancy is quick, convenient and tempting. Fraught with potential disaster, it used to be called the “poor man’s will.” Consequently, aside from marital funds, you should be very cautious of ever using it to title assets.
probate court to administer your will and oversee the distribu- tion of your estate.
To avoid probate, you should hold title to all your property in a living trust, instead of in your name.
It is effortless to add someone’s name to a title, whether it’s real estate by quitclaim deed or your bank or another financial ac- count. As a form of legal title, joint tenancy
has “right of survivorship,” which means that when one joint tenant dies, the surviving titleholders assume own- ership. However, in every form of joint tenancy there is a risk, and it is a risk you should not take.
Real estate in joint tenancy
Real estate not held in the name of a trust, corporation or LLC is either titled in a single name or multiple names, with each titleholder sharing equal ownership. As mentioned previous- ly, joint tenancy has the right of survivorship. As a result, it is a common way to hold title to marital real estate. However, mar- ried couples often believe that joint tenancy avoids probate. It doesn’t. Joint tenancy only delays probate until the death of the surviving joint tenant.
Probate
Probate exists primarily because no one has the right to sign another person’s name. If you become incapacitated, or when you die, property held solely in your name must go through the long (one to two years) and expensive probate process. As a re- sult, probate must happen even if you have a will and property in your name because a judge still must appoint an executor in
Another form of tenancy for real estate is tenants in common, which does not have the right of survivorship and goes directly to probate for the transfer of owner-
ship to the deceased titleholder’s heirs.
Finally, a common tenancy is tenants by entirety
Other common forms of title
TOM TUOHY
FOP
Benefits Plan
(TBE). TBE is essential for all police officers and high-risk professionals who are married. It provides complete asset protection for the principal place of residence, against creditor claims and judgments from lawsuits, for as long as the spouse
resides in the home.
In addition to probate, both tenants in common and joint
tenancy hold the significant risk of exposing the property to the creditor and legal claims of every person on the title. Therefore, creditor risks are a compelling reason you should never add your children to your title.
Finally, adding a name to your title triggers a capital gains tax issue.
Financial accounts in joint tenancy
Seniors often add their children’s names to bank or other fi- nancial accounts. Here are three reasons you should never do it:
1. Risk of intentional or unintentional loss: There is no le- gal protection to prevent a person named on an account from taking any or all funds of that account at any time. Strange things happen to people around money. You may undoubtedly love and trust your kids, but unforeseen cir- cumstances, inlaws or, in this case, outlaws may influence
your child.
2. Unexpected disability: If your child acquires a disability
by accident or illness, his or her eligibility for Medicaid or
SSI could cause your financial accounts to be spent down.
3. Unintentional disinheritance: The surviving joint account holder has total control, and even if you trust your child to do the right thing and share the account with siblings, that child might die, acquire a disability or end up in di-
vorce proceedings before it happens.
Except for tenancy by entirety — for a limited period in certain
circumstances — all property and financial accounts should be held in a living trust. A living trust will protect against the above- mentioned risks and provide peace of mind for you and your family.
Living trust
A revocable living trust is a written, legal document that allows you to privately and efficiently pass your assets (real property, bank accounts, stock, saving certificates, personal property, etc.) to your family, friends or charities after your death — outside of probate court. (Remember, all wills are subject to probate.) Your life insurance policies and deferred compensation accounts can name your living trust as beneficiary, subject to essential tax considerations.
Call my office today to lock in your FOP 50 percent reduced rate for a living trust. Registration in the Benefits Plan for FOP members and family is free. Visit www.fopbenefitsplan.com or call 1-866-729-5454 for assistance with registering.
Tom Tuohy is the founder of Tuohy Law Offices and the FOP Ben- efits Plan. He has been a police lawyer for 37 years. His father was a CPD detective, and his grandfather was CPD Chief of Major In- vestigations. You can reach Tom at 312-559-8400.
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26 CHICAGO LODGE 7 ■ JUNE 2019