How to avoid accidental joint tenancy

Dear Len & Rosie,

I never married and I have no children. I have two sisters, one of whom, Patty, is in a nursing home in California, paid for by the state. I am not leaving her anything because the state would probably take it and my other sister, Julie, would see that she got money when she needed it.

Everything I own; my home and my bank accounts, are in both my name and Julie’s name so that she would get it when I die. Is that enough? Should I see an attorney and have a will made up?

Betsy

Dear Betsy,

We’ve worked in the trusts and estates field long enough to see estate plans such as your own fall apart. Your plan rests on the assumption that you will die before your sister Julie, who would then safely inherit everything from you. What if it doesn’t work out that way?

When you added Julie’s name to all of your assets you created a joint tenancy. If you die first, then Julie, as the surviving joint tenant, will own everything, without having to go to court and file for probate. This assumes that the home is in Joint Tenancy. You should check your deed, just to be sure. The grantees on the deed should be Betsy and Julie, as “Joint Tenants” or “Joint Tenants With Right of Survivorship.”

If your home is in joint tenancy, then upon your death Julie will inherit the home without probate. The downside is that the property will be subject to a reassessment under Proposition 13, causing the annual property tax bill to increase dramatically. This can be avoided, but only if your sister lives with you in the home, for at least one year prior to your death.

The one problem with your plan is that your sister Julie may die first. After all, you were both born into the same generation. If Julie dies before you and you are unable to update everything, for whatever reason, then your disabled sister Patty, if then living, will inherit at least part of your estate and lose her eligibility for Medi-Cal benefits. Even worse, upon Patty’s death, your home and other assets may be subject to a reimbursement claim for Medi-Cal benefits paid on Patty’s behalf.

Therefore, Joint Tenancy is not enough. At the very least, you should back it up with a will providing for the disposition of your estate if Julie dies before you do. While you are at it, you should have a durable power of attorney and an advance health care directive in case you become incapacitated so that someone you trust may manage your affairs and make important decisions on your behalf.

Len & Rosie