Transcript - Jules Haas Episode 2

This transcript was exported on Aug 26, 2020 - view latest version here.

Audio:

Welcome to Financial Poise Presents a production of Financial Poise Webinars in which we take a deep dive into a specific topic like interviewing a single trusted advisor or expert on that topic.

Carrie Miller:

My name is Carrie Miller, and I'm the managing editor of Financial Poise. With us today is Jules Martin Haas. Jules Haas is an experienced trust and estate attorney with vast experience in helping clients with their estate planning and helping their heirs and beneficiaries upon his client's passing. He's talking with us today about types of asset ownership. Thank you, Jules.

Jules Martin Haas:

Thank you, Carrie. Well, we spent a few minutes earlier discussing sort of the fundamental place to begin with your estate plan and understanding what assets you own and different issues that may arise with them. So I'd like to move on and continue to discuss assets, because you need to dig a little deeper when you're looking at your assets. And again, this is very important. In fact, I'd say this is probably one of the most important areas to think about and understand in order to make your state plan effective. And if you look at slide two, you'll see it says type of asset ownership.

Jules Martin Haas:

And when you run down the list, you'll see there are various items in there, separate ownership, joint ownership, et cetera, all of which we're going to discuss and see the ramifications of. So let's start at the top, which is sort of a good place to start. It says separate or sole ownership, and that's easy to understand. Somebody has a bank account or they have a house or something and it's in their name alone. And that's important to understand because when you have a will, your will is going to control assets that are in your name alone, right? So with respect to a will, you say, "I give everything to my aunt Jean," or whatever assets that you own in your name alone.

Jules Martin Haas:

The will is going to control. Now, if you don't have a will, your estate goes through intestacy. Again, those assets will be in the estate, and most of the assets, that will go to your next of kin, your heirs, which we call distributees. So it's important to understand what you own in your name alone. So we go down next to the next item, which is joint ownership. And again, this is sort of a category that people are generally familiar with, right? So you own an asset, again, it can be a bank account or a house or something, and it says joint owner with rights of survivorship. So what does that mean?

Jules Martin Haas:

It means that if one owner dies, the second owner will automatically become the owner of the entire asset, because they have what we call rights of survivorship. They automatically take over that asset. That asset does not pass through the estate. Now, why is that important? Well, it's important to understand because if you write a will and you say, "I leave all of my estate," under your will to let's say your Aunt Jean, but you have all of your assets owned jointly with let's say your Uncle Joe, your Aunt Jean is not going to get anything, because all of the assets will automatically go to Uncle Joe on your death.

Jules Martin Haas:

And that's really important because people do not necessarily, A, consider those issues, understand that when they were writing a will, they are not overriding the way their assets are titled, particularly when their owned jointly. Because of that, their estate plan is not going to be effective because their intentions will not be able to be carried out. And this is an area that not only is not considered enough, it's an area causes loads of problems. For instance, what happens is... And I'll just use this simple example and this happens all the time. Let's say you have an older parent and the parent has four children. The parent did a will, said in the will, "I leave everything equally to my kids."

Jules Martin Haas:

Of course, the parent likes all the kids. No problem. Ultimately, there's one child that still lives in the area or maybe even with the parent. The kids, they got their own lives. They live in California, in Texas, in New York, but they stay in touch with mom or whoever the parent is. But the one child in New York really is closer for practical purposes. So the mom's getting older and she says, "Well, I need someone to help me go to the bank. It's not that easy. It snows. It's rainy. It's cold," whatever. They both go to the bank, and the bank rep says, "Well, I'm going to put you on here as a joint donor. It'll just make it easy. You can go into the bank. You can do whatever you want to do. No problem."

Jules Martin Haas:

Well, lo and behold, they do that. Mom passes away. The one child to New York becomes the owner of the entire account and can collect the money automatically. So the other children say, "Well, mom died. There's $100,000 she had. Where is it?" The one child says, "Well, I have it. She put me on as the joint donor. She wanted me to have all that money because I helped her out all the time." And the other kids say, "Well, that's what she wrote in her will." But unfortunately under the law, the child who is the joint donor is presumptively the owner of that account. So unbeknownst to mom, her estate plan was disrupted by creating and having assets that didn't reflect what her real intentions were pursuant to her will.

Jules Martin Haas:

So these are things that are very important to consider and think about when you're going to create your estate plan. You have to look very carefully at what you're doing and think what you're doing, even if you already have a will. So let's go down to the next item on our list. It says in trust for accounts. Well, it's basically the same concept as joint accounts. It's a little different. So you have a bank account. Usually it says in trust for or a financial account that says pay on death to. So again, automatically that asset is going to be paid to that person. Okay? Again, you have the same problem. People create these accounts. They don't realize the impact that it may have on their estate.

Jules Martin Haas:

Now, you can have an estate that has a group of different types of dispositions, where you have something in a will, something that goes outside of the will, but you need to consider this. Also, with in trust for accounts, you may have named the beneficiary on that account. But what happens if that beneficiary is not alive? Where is that money going to go? So again, it's a matter of understanding this, doing the due diligence, and seeing what your accounts are. So we also have another category called designated beneficiary. It's again, same concept. It can be a life insurance. It could be a 401(k) plan. It could be an annuity. Any type of IRA where you have a designated beneficiary.

Jules Martin Haas:

Again, that person is going to automatically get that asset when the person dies. But the important point there is that you need to know, again, who these beneficiaries are. A lot of times people set up accounts, particularly retirement accounts, life insurance, and they put on beneficiaries and it was done decades ago. They may not even remember who that beneficiary is. So again, as an example, I see situations where I'll ask a client who's the beneficiary, they'll say, "Oh, I don't really remember," or, and I see this sometimes with young couples, they'll say, "Let me think about this. Oh, I think when I created my life insurance policy or my retirement fund, I wasn't married, so I put my parents on there."

Jules Martin Haas:

Well, that's not really what they want to do now. They really want their spouse to be on there. So they have to go back and check. And in addition to that, what they need to do is they need to go ahead and understand who secondary beneficiaries may be. So they may have put down a primary beneficiary or a secondary beneficiary, or they may not have put down a secondary beneficiary. So they may really want the primary beneficiary to get this asset. But if in fact that primary beneficiary is not alive, they may want that asset to benefit that person's family, so they want a name let's say that person's child as a secondary beneficiary.

Jules Martin Haas:

So there's a lot of due diligence they need to do in order to understand what's going on with these assets. So let's take a look here. There's also a category here we call tenants in common, and this is also a very special category to understand. It really typically relates to real estate. It could be a cooperative apartment sometimes, but mostly real estate. And what a tenant in common ownership is is that there were two people that own... Or could be more, but they own the property equally in their own right, as opposed to joint tenants with a survivorship right. There's no survivorship right.

Jules Martin Haas:

So if you take a property that's owned as tenants in common with two people, when one of the tenant in common owners dies, their share, their half of the property, is automatically going to their family or whoever they designate to receive that property under their will. And people don't always appreciate the manner in which a property is owned. So they'll say, "Oh, I own it with my brother, with my sister, with my friend," or something like that, but they don't realize the ramification of what happens when they pass away. So again, another example, a brother and sister may own let's say a house that they received when their parent passed away, and they own it as tenants in common.

Jules Martin Haas:

Well, when one of them passes away, their interest then goes to their family. So then you end up with a situation where that deceased brother or sister's family owns the property with the living brother or sister. And they may not very well get along, or the new people that own it to take it over from the deceased tenant in common. And they say, "Hey, we don't want to keep this house. We don't want to keep this property. I know my father or mother wanted to do that, but we don't. The house is worth a million dollars. We want to cash out our $500,000 interest." So then you end up with dispute or litigation between the two owners or the two current owners as to what should happen.

Jules Martin Haas:

It could be a petition action where the court has asked to have the property sold. So the point here is that when you own property, you understand it. So if you have a situation such as that, it's something you want to think about now and say to yourself, "Well, if I pass away or I leave this property in such a manner, what's going to happen later on?" Because if you don't do that, it'll be figured out later on, but it may not be figured out in a way that you really want. So you could end up putting it in a trust. You could end up saying, "Well, maybe we should all sell it now before the families have a dispute or the two owners have a dispute."

Jules Martin Haas:

Again, it's a matter of understanding what you're doing and thinking about it and planning for it with respect to creating your estate plan.

Carrie Miller:

What do I do if I'm not really sure how an asset's owned?

Jules Martin Haas:

Well, what you have to do is a little work. You have to do a little due diligence. So you got to go back to your papers. You have to look and see what the ownership interests are. Look at your bank statements. Look at the financial statements if it's unclear. And many statements and papers are unclear, particularly from financial institutions. It may very well just list your name, and you have to go back and say, "Is there a joint owner here?" It may not be clear who the joint donor is from the front of the statement. So you have to go back and look at that. You should go back to your insurance broker. Go back to your human resources person at work if you have 401(k)s or retirement funds that emanate from those places.

Jules Martin Haas:

Go back to the financial institution where you set up the IRA and see who the beneficiary is. You can get new beneficiary forms. And again, in planning the estate, you can then say, "Well, this is good. I want to add so and so. I want to change so and so. I want to keep it this way. I want it to go onto my will," and then you can decide what to do. With real estate in New York, obviously you can look at deeds in New York. It's a very easy way of doing this. There's a system called ACRIS, A-C-R-I-S, and you can type it right in. Go to Google, type ACRIS, and you can look up property for all real estate in New York. It's a wonderful system, and sometimes it's unbelievable what you find.

Jules Martin Haas:

I have plenty of cases where if someone comes to me and they say, "Well, my aunt died. She owned a house in whatever, and we need to deal with this," and boom, I go to ACRIS, I look it up, and I say, "Your aunt doesn't really own this. She transferred it to your cousin three years ago. Did you know that?" And they say, "Oh, no, I didn't really understand that that happened," or they'll see that it's not owned by the aunt. She may have put it into a trust. And I'll say, "Well, what about this trust?" "Oh, I didn't know that she went for estate planning and put it into a trust. I don't know where the trust is. I don't know who the beneficiary of the trust is."

Jules Martin Haas:

So these things may affect you if you were looking at this and thinking about not only administering someone else's estate, but if you had an expectation of receiving something, how you would be planning your estate as well. And just as another small example, which is not really in the estate context, I had a client that owned a property with a brother. And lo and behold, she received an eviction notice from her brother. And when we looked at the deeds, apparently she had transferred the property to her brother a few years earlier. And what ended up happening was her brother told her that she was going to... They needed to sign papers for a new mortgage.

Jules Martin Haas:

A fellow came over, said he was presenting these papers for this new mortgage. She trusted her brother. She trusted this fellow. She signed the papers, and in reality, she signed the deed. Now, obviously we got the property back, but again, you just need to see what's going on, so you understand what you own and how it's held so you can deal with this effectively.

Carrie Miller:

Thank you. That was really interesting.

Audio:

Thank you for attending this edition of Financial Poise Presents. Financial Poise has one mission, to provide reliable plain English business, financial, and legal education to individual investors and private business owners.

Jules Haas Episode 2 Revised (Completed 07/29/20)
Transcript by Rev.com