The High Cost of Procrastinating (II of III). Why Joint Tenancy Can Be a Big Problem.

Posted By Jay Kaufman || 12-Apr-2011

For Community, Clients, Advisors

In the first installment of this blog series, I described how procrastination caused unnecessary delay, expense, and worry for one family we recently represented. Here is another.

What I now describe is a matter in our office right now. I have the family’s permission to write and publish this expressly for the purpose of helping other families.

Phyllis and Sam.

Phyllis and Sam were in their 80s. They lived comfortably in Skokie. They had two adoring daughters and several grandchildren. They lived frugally during their lifetimes and have accumulated some assets in brokerage accounts, IRAs, stocks and bonds (share certificates and reinvestment accounts with the share transfer agent) and their home. They had no debt. Some of the accounts were in Phyllis’s name only. Some were in Sam’s name only. But, mostly, the accounts and the house were titled in joint tenancy.

They had wills prepared in 1992 by another firm. They were “simple” wills that made bequests to their grandchildren, generous gifts to several charities and left the remainder equally to their two daughters. No trust was prepared. As they got older, they began to have some health problems. Of course, the Number One priority was taking care of Phyllis and Sam. Sam had severe diabetic problems that led to the need for regularly scheduled dialysis.

Phyllis Dies.

Soon, Phyllis began to forget things and increasingly needed help in managing daily affairs. In 2010, the family was informed that she had a brain tumor and that her life expectancy was likely quite limited. The family rallied. Both daughters live in adjoining suburbs and were there to help. However, they weren’t really worried about their estate because they had wills and most of the assets were in joint tenancy. Phyllis died just a few weeks ago.

Sam did okay for a short while. But soon, without his wife, he realized that, with multiple health issues, his quality of life was simply not what he wanted it to be. His daughters were with him, helping him constantly. His grandchildren came to see him. He made a very clear, knowing decision that he would stop dialysis, fully understanding the consequences of his actions.

Soon thereafter, his daughters reviewed his 1992 will with him. They asked, “Dad, does this will reflect what you want to happen now?” His answer was, “No, not really”. He described for them the relatively minor changes he wanted made. The next day, the daughters met with me to review the changes that Sam wanted.

I looked at all of the assets – the brokerage accounts, stocks, bonds, real estate. I wanted Sam to have a revocable trust because all of the property could be distributed exactly as he wished by the two daughters without government interference upon his death.

Sam Dies.

We needed to revise his will very quickly. There was no time to implement and fund a trust. Sam’s daughters knew that his mental condition could change at any time. He had stopped dialysis. His other medical conditions had forced another hospital stay. I had to draft a new will over the weekend.

On Monday, Karen and I went to the hospital and met with Sam to ensure that the will reflected what he wanted done. The will was signed in accordance with the legal requirements on Monday afternoon. Sam would not have had the legal competence to sign a new will had we come the next day.

Sam passed away on Friday, just a few short weeks after Phyllis died.

Estate Settlement.

So, how do we settle Sam’s estate? What do we have to do?

Suzanne and I have now met with the heirs and have an inventory of all the assets. All of Phyllis’s assets will become the property of Sam’s estate. All of Sam’s sole property and the property received from Phyllis’s estate will be distributed to the other heirs and the daughters.

Unfortunately, the only way to settle both these estates is to bring two probate estates in the Circuit Court of Cook County. It makes the estate settlement laborious and time consuming compared to a private trust settlement.

The good news? There are provisions for “independent administration” in Illinois probate law. This will allow the daughters to handle most of the administration work without court supervision. It will ease the burden to a great degree.

Lessons Learned.

So, what lesson have Phyllis, Sam and their family taught us? There are two. First, procrastination in estate planning limits the options available. Don’t wait. No one expects both spouses to die in rapid order, but, it does happen. Second, while joint tenancy accounts are a simple solution and work well if one spouse dies, there can be severe complications, and they don’t work in the event of a common disaster or in the event that one spouse dies soon after the other.

I’m going to do everything I can to make the estate settlement as easy as possible. However, I wish I could have helped this family more.

Categories: Estate Planning, Wills, Trusts

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