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So a Doctor Walks Into a Bar...

You may be asking yourself "Wait... wasn't this supposed to be a joke about a doctor?"

Probate (the court process for administering an estate after death) has a bad reputation. Because many people have heard that the probate process can be prolonged, public, and expensive, they try to plan ways to avoid it. One notion that is often suggested by the non-legal community is that a good way to avoid probate is by naming a child or beneficiary as a joint owner on an account or piece of property.

Here's where the doctor comes in: We heard from one woman that while sipping cocktails with a physician at a party, he gave her just such advice. She proceeded to put her daughter's name on the deed to her house as "joint tenants with rights of survivorship." While it's true that this would have avoided probate if the mother had died, an unexpected problem occurred. The daughter's husband filed for divorce and the mother was forced to buy her former son-in-law's interest in her own home. This would not have happened had the mother not put her daughter on the deed (and had the daughter not transmuted (changed) the property to community property).

We greatly appreciate all that the medical community has accomplished and the immense services that they continue to provide every day. However, we also strongly suggest that you speak with a qualified attorney to discuss what estate planning methods are most appropriate for you. Your attorney may not even discourage probate! (Stay tuned for a discussion of the pros and cons of probate in a later post).

In our office, we often hear that age or environmental circumstances are the impetus behind wanting to create or update an estate plan. While these reasons are valid, we always ask - "Do you drive in Albuquerque?" We hope none of you suffer a car accident, but it’s still important to be aware of the potential legal consequences. Not only could a car accident cause injury or the loss of a life, it can also lead to litigation.

When meeting with families who have successful adult children, we hear that their child is an adult with a high-paying job, a caring spouse, and beautiful children. However, many individuals often overlook the potential creditors and predators that could appear despite a child or beneficiary's age or profession. Think divorce, car accident, bad business deal, family disputes, etc.

While it may be true that naming a child or other beneficiary as a joint owner on an asset could help to avoid probate, as a general rule, we do not recommend this strategy. We generally do not recommend this approach because it can subject the asset to the claims of the beneficiary's creditors and could also be deemed to be a taxable gift. For example, if a child is named as a joint owner on an asset and then that child is at-fault in a car accident, he may be sued and that judgment could attach to the asset on which you named the child as a joint-owner.

Please call our office or speak to another qualified attorney if you would like to discuss other approaches that might meet your goals without these unwanted consequences.

Post by: Madison R. Jones, J.D., M.B.A.

Disclaimer: These materials are designed as a general overview and should not be relied upon for legal or tax advice. Please consult a qualified attorney and/or tax advisor for compliance and up-to-date information and advice specific to your circumstances.



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