Q&A with Loraine: Distribution of Jointly Owned Property

Question: How is the distribution of joint property handled when a married couple have separate wills but own assets together? I understand that assets that are in my name only or my spouse’s name only can be distributed as each spouse wishes. But what happens to joint assets, which most of ours are? When one of us dies, we agree that the surviving spouse will receive the joint assets. For example, what happens if my wife wants the contents of our joint bank account distributed evenly between our 2 adult children and I want the joint assets distributed 60%/40% between them. I am not the legal father of the adult children but their stepfather.

Loraine’s Answer: If you and your spouse own property jointly, then what happens to that property when the first spouse dies and later, when the second spouse dies, depends on several factors. The first factor is how you own the joint assets. Georgia recognizes two forms of joint ownership: “tenants in common,” which does NOT automatically transfer ownership of the joint property to the surviving owner at one owner’s death; and “joint tenants with rights of survivorship” (often just called “joint tenants”), which DOES transfer ownership of the joint property to the surviving owner automatically at the first owner’s death. [Please also note: Although you will sometimes see the term “joint tenants in common,” this is NOT a form of joint ownership in Georgia. It is a mistaken combining of the two actual forms.]

The default form of ownership differs by asset. For example, the default form for financial accounts, such as checking or savings accounts, is joint tenants with rights of survivorship. In most cases, joint bank or brokerage accounts will transfer automatically to the surviving owner (you have to take special steps to have a financial account owned as tenants in common, and most people do not take these steps). With real estate, cars and everything else, the default form of ownership is tenants in common. For a deed or a car title to create a joint tenancy, it must contain the actual words “as joint tenants” or some other term that clearly indicates that the joint ownership is intended to have the right of survivorship and not just be a tenancy in common.

If you and your spouse own assets as joint tenants, those assets will automatically become the sole property of the surviving spouse when the first spouse dies. Assuming that the surviving spouse still owns those assets in his or her own name at his or her death, and does not move them into another joint account, apply any beneficiary designation, or move them into any kind of trust, then that spouse’s Will controls them. For assets owned as tenants in common, the first spouse’s Will would control his or her interest. However, if the Will leaves those assets to the surviving spouse outright, the surviving spouse’s Will apply to those assets at the surviving spouse’s death (again assuming that the surviving spouse just continues to own those assets in his or her own name after the first death), and they will still end up eventually passing the way that the surviving spouse wishes, not the way the first spouse wanted them to pass. The only way to ensure that the first spouse’s wishes retain control over the assets is for the first spouse to leave the assets in a manner other than outright to the surviving spouse, either by having assets pass to the surviving spouse in a trust that limits how the surviving spouse can deal with the assets to some extent or by leaving the assets to persons other than the surviving spouse at the first spouse’s death.

You and your spouse need to get the help of an experienced estate planning attorney as soon as possible to put together an estate plan you both agree on. When you have a blended family or when you don’t agree on the ultimate distribution of your property, deciding who gets what can become complicated. With advice from a seasoned estate planning attorney, you can evaluate the various options and tradeoffs, and come up with an estate plan.

Key Estate Planning Takeaway: As more Americans blend families, deciding who receives which assets at the first or even second spouse’s death becomes complicated – especially when the majority of the couple’s assets are jointly held as is this case in this question. For blended families, having a clearly laid out estate plan is critical in order to try to ensure that both spouses’ wishes are reflected and to reduce any confusion and hurt feelings that may come from each spouse’s death.

This “Q&A with Loraine” blog series features answers from Morgan + DiSalvo Partner Loraine DiSalvo to questions posted on www.avvo.com. A key takeaway from each exchange highlights an important facet of estate planning.

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