Tools to Minimize Taxes in Estate Planning: Why Using a Will is not Always the Best Option
There are many tools that can be used to minimize the MANY taxes that can impact how much your beneficiaries actually get after your death. For example, Joint Tenancy on Real Property is often used as an estate planning tool. One person who holds legal title to real estate (for example, a parent) will bring someone else onto title as a “joint owner” (for example, their child) with a right of survivorship. “Survivorship” means that when one of the joint owners passes away, rather than changing title, the deceased’s name is simply removed from title. The alternative is registering both on title as “Tenants-in-Common”, which is where title is held without a right of survivorship. Instead, when one of the Tenants-in-Common passes away, their interest goes to their estate.
This strategy helps avoid paying the Estate Administration Tax because the assets will not pass through the parent’s estate directly. Instead, the child will obtain full ownership of the assets upon the death of the parent through right of survivorship. A second benefit to this planning method is that it simplifies the administration of the estate since the asset will not need to be distributed through the estate.
However, if you are thinking of using joint asset ownership as a method of estate planning, there are some important risks to be aware of. First, granting an ownership right means relinquishing full control. You can no longer make unilateral decisions about financing and sale. There are also other potential tax risks. Also, if there are multiple children and only one is made a joint tenant on title, it could cause jealousy among the children, which could result in a legal dispute after death.
Joint tenancy is just one of many estate planning tools that can be used to help you succeed your property in a tax efficient manner. The lawyers at Grinhaus Law Firm will help you explore the various options available in order to ensure your estate is distributed according to your wishes and in the most tax efficient way possible so that your beneficiaries, and not the government, receive what they need to live comfortably. For more information on this topic, call or email us to see how we can help.
PLEASE NOTE: THIS IS NOT INTENDED TO BE LEGAL ADVICE AND SHOULD NOT BE RELIED ON AS SUCH. IT IS IMPORTANT THAT YOU CONSULT WITH A LICENSED PROFESSIONAL.