Joint Tenancy: Most couples with less than $1,000,000 have all their assets titled in joint names with survivorship rights with each other. Upon the death of the first spouse, the assets will automatically pass to the survivor. There is no probate. Joint tenancy with someone other than a spouse has many disadvantages which should be evaluated prior to using joint tenancy as a way for your assets to pass upon your death.
Last Will and Testament: A Last Will and Testament designates the person you want to receive your property at death, and the person you wish to manage the probate process for your estate (Personal Representative). All assets titled in an individual’s name alone must pass through the probate process.
Living Trust: A Living Trust is a way for you to hold and manage your assets while you are living and competent. It also provides for someone to step in and take over the management of your assets upon your incapacity. In this respect it is similar to a Durable Power of Attorney. However, a Living Trust also provides for the distribution of your assets at your death, thereby avoiding the probate process.
As with a Durable Power of Attorney, there is no formal oversight so be very cautious when choosing the person to manage your Living Trust when you are no longer able to.
Your Living Trust should also clearly define incapacity. It is generally a good idea that your Trust require two physicians to certify in writing that you are not competent to manage your financial affairs.
Living Trusts are excellent vehicles for property management and the distribution of assets at death. However, the use of a Living Trust makes it more difficult to qualify for Medicaid, so caution is advised if you are facing a known medical situation which may require nursing home placement. If you have questions regarding Medicaid or asset protection planning, it is very important that you consult an attorney familiar with asset protection planning prior to setting up a Living Trust. For many years we have advised clients in this area and are familiar with the current status of the law.