Schlagel Gordon & Kinzer, LLC

A will merely directs how property that is subject to probate will be transferred following a death. Thus, if a person leaves an estate and dies with a will (testate), the will has to be probated in order for the will to be effective. In certain limited size estates, even if there is a will, there are other options to a full probate under certain circumstances.

If I own property that is just in my name when I die, my estate will have to be probated.

This is generally true, however, some alternatives to probate include a small estate’s affidavit for relatively small estates. Another alternative to probate, available where property does not need active management for six months, is the procedure of a Determination of Descent, a very simplified court process that is brought six months following the date of death.

My family will be better off if I just put my house and other property in joint tenancy with my child(ren) and avoid probate.

That may be an effective way to avoid probate but there are generally safer methods to effect probate avoidance through payable on death or transfer on death accounts. Other factors that should be considered in the event you are considering using joint tenancy as a probate avoidance mechanism are as follows:

The potential loss of tax benefits of owning property at death because of the stepped-up basis that heirs receive in the event property is held until death.
If minors are nominated as joint tenants, a guardian ad litem and a conservatorship would ultimately need to be set up in order to sell the property and the court would require that the minor’s percentage ownership be set aside to them regardless of who are the co-joint-tenants.
If any of the co-tenant children might have marital problems, this type of ownership could complicate a divorce proceeding and could potentially cause the percentage ownership owned by the child to be divided with the ex-spouse.
If one of the co-tenant children should predecease the parent, the grandchildren by that predeceased child could be disinherited.
All co-tenants have an equal right to possession and, should a disagreement occur between or among the parent and one or more of the children, a lawsuit could result.
A co-tenant has a right to partition their interest in the property, which again could force the sale of the property.
Putting another person on the title to real estate is a completed gift. A gift tax return might be required, depending upon the size of the gift.
In the event a joint tenant has creditors, those creditors may attempt to seize the account, even if you are the sole contributor to the account. If this occurs, costly and complicated litigation will likely ensue.

If you put your children on a house as a joint tenant, you can generally remain in the house. However, if you transfer the house outright by quit claim deed, you will have transferred all beneficial right in and to the property and could be evicted from the house. Further, all of the concerns set forth in "My family will be better off if I just put my house and other property in joint tenancy with my child(ren) and avoid probate." above relating to property titled in joint tenancy remain applicable under this scenario. The more common and proper method to avoid probate where real property such as your home or other real estate is involved is to consider a transfer on death (TOD) deed or a trust. The TOD allows you to preserve the step up in basis that your child will receive when inheriting the property and will not allow your child, his or her spouse or his or her creditors to place your property in jeopardy during your lifetime.

A common selling point for a trust is it avoid costly probate fees While a measurable cost savings is generally recognized in the event the lengthy and costly probate process is eliminated because there is no formal probate proceeding, there will still likely be attorney’s fees for such things such as setting up a separate tax identification number for the trust, providing tax advice regarding the income that accrued before death and after death, dealing with disputes and other administrative matters in the administration of the trust, and monitoring the transfer of title to property that is involved. The significant advantage of a trust is that the administration of the trust in all of these areas occurs without the need for obtaining prior court approval, which is generally a costly and time consuming process.

I cannot keep control of my property, get a stepped-up tax basis on my property when I die and avoid probate without using a trust.

Not necessarily. Kansas law recognizes payable on death and transfer on death ownership of certain assets. These are revocable type ownership procedures so that there is no completed gift at the time of the retitling, unlike in joint tenancy planning which has the effect of vesting the co-tenant with rights in the real property at the moment they are named a joint tenant. As such, there is no gift tax return required and the original owner is free to deal with the asset free of interference by the ultimate beneficiaries until their death. Since the property remains owned by the original record owner and transfers as of the moment of death, the recipient of the asset also generally receives the benefit of the step-up in basis of the asset being transferred.

That may be true, but certain other procedures and ways of owning property might, in the right circumstance, be less expensive. These include a Determination of Descent procedure, a Payable on Death Account or Transfer on Death titling, Beneficiary Designations on such things as IRAs, insurance policies and a small estate’s affidavit.

That would generally be true, if the property is owned between the husband and the wife in joint tenancy. However, if the property is owned only by the deceased spouse or is titled in tenancy in common with the deceased spouse, the rights to the property will depend upon state specific homestead laws, which often give the right of possession but not complete ownership of the house to the spouse. Kansas intestacy law gives half of the property to the spouse when there are surviving children and the entire house to the spouse if there are no surviving children. Missouri law recognizes tenancy by the entirety which treats most co-ownership between spouses the same as a joint tenancy.

If my spouse is in the hospital, I will be able to talk to the physician about his/her condition.

It is best to keep a joint account with one of my children, so they can pay my bills, have money to bury me and divide with other siblings.

If I want to give money to my church or my favorite charity when I die, it is best to give them stock and give my tax deferred IRA to my children.

A gift of a non-Roth IRA has embedded with it an income tax liability that will have to be paid when the child withdraws the money from the IRA. This is called Income with Respect to a Descendent. A charity is entitled to receive assets in the IRA without paying any income tax. Many times because stock receives a stepped-up basis at death, it is more tax efficient to give the stock with a stepped-up basis to the child and the charitable gift from the IRA.

True. Kansas and Missouri trust law allows for trust to be set up for living animals (but not for animals not yet born).

Since I brought all of the money into the marriage and we have only been married five years, I can disinherit my spouse if I want to do so.

Spouses, regardless of the length of the marriage, have certain rights in their spouse’s property. For instance, the household goods and a living allowance, unless waived, are payable to the surviving spouse. A homestead or homestead allowance is also available to the spouse. Generally, a division of most of the remaining assets is a function of the length of the marriage and whether there is a prenuptial agreement.

My spouse and I can only pass $2,000,000.00 free of federal estate tax this year.

Unless previously used with lifetime gifts, each person dying in 2008 can pass $2,000,000.00 free of federal estate tax. Therefore, if an A-B Trust is implemented and the assets between the spouses are equally divided, up to $4,000,000.00 can be passed in 2008 free of federal estate tax. Additionally, per donee gifts of $12,000.00 per person (Annual Exclusion Gifts) can be made by each spouse so that $24,000.00 can be given to an unlimited number of individuals such as children, grandchildren, spouses, etc. each year without utilizing the unified credit.

I don’t want to hire an attorney to plan my estate, because it could cost a lot more than I can afford or want to spend.

SGK offers a complimentary half hour free consultation. During this period of time, a snapshot view of the assets can be evaluated and a written fee schedule will be presented upon which the fee will be based. Generally, a client will know in advance how much the attorney fee for the project would cost before any commitment to proceed is made.