How Joint Ownership Affects Your Estate Planning
It is never too early to start planning for the future. Creating a solid estate plan can avoid blunders and make the transition after your death easier for your family. Passing on your estate to loved ones is important to many people, so doing it right from the beginning is crucial. People who have joint ownership of a property may wonder how that affects their estate plan, and what it means for beneficiaries. Here is everything you need to know about joint ownership and your estate plan.
There is one main advantage to having joint ownership in your estate plan: avoiding probate. The process of probate — sorting out a person’s estate among beneficiaries and settling debts — can be long and take up a lot of money. The efforts exerted just to go through it can sometimes make it not worth it; so many people prefer to avoid it at all possible. In the case of joint ownership, when one of the owners passes away, the other owner automatically receives the property without probate. There is no question or debate over who gets the shared property.
Like the advantages of joint ownership, there is one main disadvantage to it: taxes. An inheritance tax may be applicable if you live in a state with such laws. Basically, an inheritance tax applies to anyone who receives a property or sum of money after another person’s passing. Since the property was free, it needs to be taxed. In the case of joint ownership, the inheritance tax may apply. The only exception is for spouses. A spouse can receive gifts free of taxes.
Credits on Jointly Owned Property
If a spouse passes away and the other spouse receives the jointly owned property, no debt left over by the deceased spouse can be taken from the property. This falls under the umbrella of the free gift tax for spouses. The debts will be taken out of other properties, possessions, and investments formerly owned by the deceased.
Confusion Over Estate Planning
There can be a hefty amount of confusion over estate planning. You may not know if a will is good enough or if you should invest in a trust, if joint ownership of a property is beneficial for you or not, or if you should get a general power of attorney or a durable one. All of these questions can be answered by a lawyer, like an estate planning lawyer in New York from Kaplan Law Practice. Make an appointment to talk to one about your situation and see what move might be right for you.