We commonly see advisors use Joint With Rights of Survivorship (JTWROS) accounts or alternative joint structures with adult children to bypass probate for estate planning.
Using JTWROS accounts with adult children can provide more negatives than benefits since if the structure is not done correctly, the assets may not bypass probate.
Recently, we had a case with an advisor where the client’s own estate lawyer forced the JTWROS accounts to probate court and had those assets probated.
This cost the estate and the beneficiaries a considerable amount of time and money that could have been avoided with proper planning.
What are the Cons of JTWROS for Estate Planning?
- Bypassing Probate is Not Guaranteed
- Courts have ruled that it is not be assumed that the joint account passes to an adult child
- Creditor Issues
- If the adult child has a creditor issue, that account is up for grabs by creditors
- Loss of Control
- The adult child can cash the account out and run away with the funds
- Non-Residency Issues
- You cannot name a non-resident as a joint account holder
- Unable to do Varied Inheritances
- You must divide the account equally between all holders, can’t provide specified amounts
How can I ensure my Estate Planning will be upheld?
Segregated Funds solve all the above issues
- Bypassing Probate with Named Beneficiaries
- A named beneficiary is iron clad in a Seg Fund contract and is virtually impossible to contest
- No Beneficiary Creditor Issues
- If an Insurance Beneficiary has a creditor issue, it does not affect the contract since they don’t own the assets
- Owner Retains Control
- A beneficiary cannot access the contract until the annuitant(s) pass away, so they cannot abscond with the money
- Solves Non-Residency Issues
- A beneficiary can be a non-resident
- Can Do Varied Inheritances
- Give as little as 1% to as much as 100% to beneficiaries
- Can also add on the Annuity Settlement Option to provide control from the beyond the grave
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