Now that you’ve inquired into the process of estate planning and the actions you need to take in order to keep the process moving outside the controls, costs, and constraints of the Probate Court. Our firm believes in avoiding the Probate Court and process where possible. Wills are important to have in order to carry out your wishes, but wills do nothing to protect against Probate—wills direct Probate assets. In a Probate setting, there are unnecessary expenses (fees in Florida and Ohio are both set by statute) and the ultimate decision is left to the Judge—not to you.
While trusts are the most flexible and surest of options, they are not always the most practical. Below, I have included the basic steps every couple can take during their lifetimes to ensure the smooth transfer of assets without the necessity of Probate and avoid the necessity of a guardianship over their person and estate. Similarly, single persons can use this information for the titling of their assets.
I have broken down the different stages that may occur during both your lifetimes and the steps that should be taken at that time.
Both Alive, Both Well
You should currently have all your bank accounts held in joint and survivorship. This looks something like “Tom and Sue Smith and/or the survivor of them”. Sometimes, it simply looks like “Tom or Sue”. You can make sure in any event just by asking the Bank that holds your accounts, CDs, etc. Be sure you have designated beneficiaries on all of you life insurances and IRAs.
Your home should likewise be titled as joint and survivorship between the two of you. In Florida, this ownership is referred to as tenants by the entireties and carries its own tax and planning consequences. There are other ways to make your home pass outside of Probate. One of those ways is to retain a life estate and leave the remainder to your heirs, as is the case here. You need to seek counsel to determine which way works best for your tax planning and family needs.
At this point you should already have executed Power of Attorneys (including Health Care, Business, and Living Will provisions) to your agents in matters both involving Healthcare and Business. You have done so. This allows your agents to be able to care for you and your assets, taxes, etc. should you become unable.
In Ohio and Florida, Health Care and Business Powers should contain HIPPA provisions in order to comply with current Federal law. See http://www.hhs.gov/ocr/privacy/. In Florida and Ohio, Powers should be updated to comply with recent 2011 legislation.
Upon the First Spouse to Pass Away
Remember, everything that was titled as “joint and survivorship” property is immediately owned by the surviving spouse and/or other named person on the account. This means that you will not have to use the Will and/or the Probate Court in order to get the joint bank accounts, the home, and the CDs into the other spouse’s name—he/she ALREADY owns it.
However, that does not mean there is nothing to do to reflect the title change; something has happened. One of you has passed away. You will more than likely need to present the Bank holding your accounts with a death certificate of your deceased spouse in order to retitle the account monies in the survivor’s name only.
If nothing more is done, the account monies become Probate assets upon the survivor’s death and are subject to a Will setting and Court’s authority. You may now change the title to the accounts to reflect a “transfer on death” designation. This method, like joint and survivorship, ensures that title will immediately pass to those designated by the survivor. The title on the accounts/CDs will look something like: “Sue Smith, payable on death to: Jonathon, Sarah, and Sam”. The listed beneficiaries will not have present access to the funds (unless for the survivor’s care exercised by the Power of Attorney). However, Ohio law does not allow “per stirpes” designations; this means if a named child/beneficiary has died before the account has, that child’s share is redistributed among the named beneficiaries and the grandchildren are excluded from sharing.
You may also choose to vest a person with a present interest in your account—again, using the title Joint Tenants with Rights of Survivorship. Remember, however, that in titling your accounts that way, you have given the other named person complete and present access to those funds to the exclusion of your other heirs. Any decision should be carefully considered with counsel in order to assess the risks and benefits of all your options.
You will also need to seek counsel in order to reflect the title change of your home. Remember, with the remaining Joint Tenant owning the property—without any action on behalf of the survivor, the home place becomes a probate asset for the second owner. In Ohio, the surviving spouse and/or named beneficiary may execute “transfer on death affidavits” with the help of counsel; this will again ensure that the Probate process is avoided upon the second person to pass away.
In Florida, “transfer on death” forms are not recognized in relation to real property. It is important to consider the use of trusts, business entities, and/or life estate deeds in order to avoid Probate. These are available forms in Ohio as well. Unlike the Probate setting, no one can change your mind or the actions you already took during your lifetime to ensure smooth title transition to your home. Any decision should be carefully considered with counsel in order to assess the risks and benefits of your options.
If the survivor has become incompetent or otherwise unable to perform any of the acts above, the agent designated in a POA may step in to perform the above acts on behalf of the survivor.
Upon the Second Spouse to Pass Away
Everything that was titled as “transfer on death” property is immediately owned by the listed beneficiaries. This means that you will not have to use the Will and/or the Probate Court in order to get the bank accounts, the home, and the CDs into the beneficiaries’ name—they ALREADY own it.
The beneficiaries will need to present the Bank holding your accounts with a death certificate of the second deceased spouse in order to retitle the account monies in the beneficiaries’ names only or outright distribute the funds.
You will also need to seek counsel in order to reflect the title change of your home. This is a necessary step to reflect title and would be utilized in the Probate setting as well. Unlike the Probate setting, no one can change your mind or the actions the survivor took during his/her lifetime to ensure smooth title transition.
This article was written by Jessica B. Moon, Attorney licensed in Ohio and Florida. David Bacon and Jeff Roth are partners in Roth & Bacon Attorneys, LLC; Jessica Moon is an Associate. The Offices are located in Upper Sandusky, Marion, and Port Clinton, Ohio, and Fort Myers, Florida. They have focused their practice to provide estate and business planning concepts to their clients. Nothing in this article is intended for, nor should be relied upon as individual legal advice. The purpose of this article is to help educate the public on concepts of law as they pertain to estate and business planning.
Copyright @ Jessica B. Moon.