Over the years, we have discussed that it is very important for individuals to understand their options and the repercussions of their decisions as it relates to them establishing their estate plan. Specifically, a number of individuals come into the office and want to make sure that their assets are going to avoid probate upon their passing. We always discuss that they need to determine who exactly they want to inherit their assets and how much. Then we can come up with a plan on how to do that. For example, titling assets as joint tenants with right of survivorship will allow the joint owner to be the beneficiary upon an individual’s passing. Naming an individual as either a payable on death beneficiary for bank accounts, or a transfer on death beneficiary for vehicles, real estate, or stocks and bonds will allow those assets to pass directly to the beneficiary named. Finally, naming a beneficiary on an IRA, a life insurance, an annuity, or some other retirement type of asset will allow those assets to pass directly to the named beneficiary without having to involve the probate court. Finally, another way to avoid probate is to establish a revocable trust making sure that the assets are either owned by the revocable trust or that the revocable trust is named as the beneficiary. This could occur either through a beneficiary designation, a transfer on death or payable on death designation. All of these items will allow an individual to avoid probate.
Sometimes clients are not interested in establishing a trust and they simply want to avoid probate by using a joint with right of survivorship designation or payable on death, transfer on death, or general beneficiary designation. A significant portion of the time, using these types of titling mechanisms will accomplish the goals of the individual and pass their assets to the appropriate people without going through probate. However, I recently came across a situation where it would have been better for an individual to have gone through probate with their assets passing to their loved ones, or establishing a revocable trust instead of using the simplistic titling items mentioned above.
The following were the facts of the situation: An individual passed away, but before they passed away, they had established a transfer on death affidavit where they named their two children as their transfer on death beneficiaries of their residence. The individual passed away and the residence passed directly to their two children. Both children wanted to sell the house, but unfortunately, one of the children was in the process of a divorce situation with her spouse. In Ohio, in order to transfer a clear title to real estate, not only do the owners have to sign the deed, but also their spouses have to sign the deed in order to waive dower. Dower is a legal term which allows a spouse a real estate interest in a piece of property owned by their spouse even if their name is not on the deed. Therefore, in this situation where the individual was in the process of obtaining a divorce, either their spouse needed to agree to sign the deed so that they could sell their mother’s home, or they would need to wait until the divorce situation was settled. They could also possibly go into the family court and try to obtain an order requiring the spouse to sign any necessary deed in order to sell the mother’s home, but that would take time. In addition, they could also potentially file a partition action which allows an owner of real estate to force the sale of a piece of real estate. Again, that would be costly and would take a significant amount of time.
Therefore, the family was stuck and decided to wait until the divorce was settled before they would be able to proceed with selling their parent’s home. That presented other issues in that the house would be empty and subject to theft or vandalism. At a certain point, they would not be able to insure the residence because it was unoccupied, as well as some other significant issues.
Therefore, when planning your estate, please take into consideration the specific situation in your family and also whether or not your eventual beneficiaries have any potential marital issues on the horizon which could affect the administration of your assets. Please make sure to review these items with your estate planning attorney when trying to establish your estate plan.
NOTE: This general summary of the law should not be used to solve individual problems since slight changes in the fact situation may require a material variance in the applicable legal advice.