Joint Tenancy vs. Tenancy in Common: What is the Difference?

For Estate Planning Which is Better: Joint Tenancy or Tenancy in Common? The Answer May Surprise You!

Many estate planning clients are unaware of the difference between joint tenancy and tenancy in common. Not knowing can be hazardous to your family and property and interfere with the proper result with your Will or estate planning.

Let's discuss how TIC works vs. JTWROS.

1. JTWROS is a legal fiction. This is because each joint owner owns an undivided 100% interest in the property. Because each cannot own 100%, it is actually a construct to produce the following result. When the first joint owner dies, the deceased owner's interest vanishes. The survivor is left owning 100% of the property. Title doesn't pass to the survivor, they already owned 100%. The interest of the deceased owner vanishes for title purposes.

This is why for some couples of very modest means, owning property jointly works like a mini-estate plan to avoid probate at the first death. It accomplishes nothing at the second owner's death.

2. TIC ownership is different. Each TIC owner owns an undivided 50% ownership interest unless the title document, the deed specifies a different percentage. When the first TIC owner dies, their percentage interest passes through their estate or estate plan. The survivor's percentage interest remains in the survivor's hands.

The catch is this: neither is better than the other. The consequences of each is different. We pick the form of ownership we want based on how we want things to work, both on the first death and the second death. There are also tax differences that are beyond the scope of this article.

To learn if you have the right ownership form on real estate or other property, consult with your estate planning attorney immediately.

Let me know what you think and if you have comments and questions. Thank you.

Bernie Greenberg

Three Things to Know About Which Comes First: Financial Planning or Estate Planning?

Which Comes First, Your Financial Plan or Your Estate Plan? Here are the three reasons you MUST do your estate plan first.

I am asked frequently, which comes first, a client's financial plan, or estate plan? How an advisor answers this question will tell you much about whether their priorities are aligned with yours or not.

Here are the three things you need to know to answer this question and properly protect yourself, your family and your property.

1. Financial Planning Requires Time.

Financial planning is important to your financial success. However, for any financial plan to work there is a vital requirement: time and lots of it. Financial planning is a process of goal setting, asset alignment coupled with savings and investment--over time. Here's one example:

Say you want to ensure a child can go to college. Your financial planner will assist you in establishing a plan that will involve savings and investment so that by college age, the college fund will either pay for or assist in college related expenses. The critical element in the plan is time. There will be insufficient funds the first few years of the plan to pay for college. You can see the same applies to goals like retirement. If the time horizon is not realized the plan fails. This is the reason that life insurance is an estate planning tool before it is used in a financial plan. More on that thought below.

2. Protect Against the Worst Risk First.

The worst risk any client faces is dying or becoming disabled too soon. In other words, a near-term event that is unplanned. Unlike the financial planning time horizon, the worst risk can happen any time. A main reason to do your estate plan is to protect against the worst risk--an unplanned death or disability. Since this is an unplanned event, protecting against such risk is priority ONE.

3. Estate Planning Has No Time Requirement.

There is no time required for your estate plan to work. Your estate plan must take into account the unplanned and near-terms risks mentioned above. I can tell you that most clients who live to life expectancy do not die with their original estate plan. A client's estate plan will be revised several times over the course of their life. This is the beauty and necessity of the estate plan. It requires no time, no specific course of events in order to operate, unlike a financial plan. As mentioned above, this is why life insurance is part of estate planning before it is considered in the financial plan--we can protect against an unplanned, near-term death with life insurance.

Those are the three reasons that your estate plan comes before your financial plan. Both are important and you should pursue both. Start with your estate planning to protect against the worst risk first and then start your financial plan.

Let me know your thoughts on this important estate planning issue, your comments and questions are welcome. Feel free to email me at: bgreenberg@kgattys.com or call me any time at: 303-688-3535. Thank you.

Bernie Greenberg

U.S. Senate Declares War on Small Estates! How to Arm Your Estate Plan and Fight Back

On July 25, 2012 the U.S. Senate declared war on your estate. Here's how your estate plan can fight back!

In a shocking political move on July 25, 2012 the U.S. Senate fired the first volley in a political war on federal taxes. The Senate passed a bill (which has little, if any, hope of passage in Congress) extending for one year several income tax benefits for most Americans. High income earners see significantly higher income taxes under this bill.

However, the bill does not extend the existing $5 million estate tax exemption. Instead, in a move that should strike fear in your estate planning, the bill returns all federal transfer tax (estate; gift; and generation skipping) exemptions to the 2003 level of only $1 million. While this number sounds high it is actually alarmingly low.

The federal estate exemption stood at a mere $600,000 in 1987. In 2012 dollars, that would equal a little over $4.7 million. So the 2012 exemption of $5 million only keeps pace with the 1987 exemption. The Senate bill turns the estate planning world upside down by redefining wealth in the U.S. Now the Senate has targeted small and middle class estates for the largest tax hike in history.

Now it is doubtful that the Senate's bill will become law. First, it is a slap in the face of President Obama, who asked for a bill setting the estate tax exemption at $3.5 million, it's level in 2009. Second, such an assault on middle class families is not only politically unwise in an election year, it is widely viewed as political grandstanding.

Nevertheless, this bill is out there and if it did become law, represents a major strike against your family and your property. So how do you protect yourself and make sure your estate plan is properly armed against this attack? Here are 3 simple steps to follow:

1. Review your estate plan immediately with your estate planning attorney.

2. If you don't have an estate plan, it's now time to do your plan. Learn how this bill affects you and your family and what your options are.

3. Act quickly. Several options and strategies require both spouses to be alive to take advantage of the current exemption rules. This means you should approach completing our estate plan with urgency.

We watch the progress of this bill as it attempts to wind it's way through Congress. With the election season upon us you will hear much about this in the coming days. To find out how this bill may affect you and your family, please let me know.

Bernie Greenberg