Funding your estate plan is a necessary step
You have your estate documents in place, and you have been reading my articles the last few weeks about funding your estate plan. However, someone told you somewhere that you did not really need to fund your plan. They said that you could just add someone as a co-owner, or just write a list and slip it into the envelope with your trust.
The problem with these myths is that they skip over key understandings of Nevada law.
First Myth: Joint Ownership Is Enough. I do not recommend that you add a child or another person as a co-owner, or joint tenant on any of your property. Joint ownership has many draw backs, especially if you are not married to the other owner. It means that you have given that asset to the other person – not 50 percent of the asset, the whole asset. The joint owner has the equal right to access, possess, spend or sell the asset as you do.
If it is your bank account, that means the other person can spend it all. If it is a house, that means that he or she can occupy it all. It also means that if you want to sell your house, the other person must sign off on the sale. Joint ownership means a loss of control.
Joint ownership also means increased risk. The asset is now subject to the other owner’s known and unknown creditors. A creditor might be something obvious like an unpaid bill, but it might be the victim of the car accident that the other owner hits tomorrow, or the soon to be ex-spouse. This is a significant problem in the case of your primary residence, which can be protected as your homestead.
Under the homestead exemption, your home cannot be taken to pay your debts (except by the mortgage holder). The house you just deeded to your child cannot qualify as the homestead of the child since the child is not living there as his primary residence. This means that, should the child have a creditor, one-half of your home could be forcibly sold to pay the child’s debt and it could not be protected as part of your homestead.
Rather, funding these assets through the pay on death designations, or ownership in a trust, can achieve your goals without loss of control or increasing your risk.
Second Myth: I’ll just list all my property and attach it to my trust, and that will put it into my trust.
This simply is not true in Nevada. In Nevada, the way property is titled, and whether there is a pay on death designation, controls.
Thank you for making the list, it will be helpful in identifying your assets but it will have no impact on whether it is in your trust or not.
The reason this myth persists is because there is a provision under California law for this type of list. In Nevada, however, such a list means that some level of probate will likely be needed to actually complete the transfer. Therefore, making this list does very little to streamline the process or to minimize delays and costs.
Instead, you need to review how your property is titled, and whether it pays on death. Check your accounts, real property deeds, vehicle titles, and beneficiary change forms. Make sure that these designations are consistent with your estate planning goals and update them if necessary.
Cassandra Jones is an elder law and family law attorney in Gardnerville. She can be reached at 782-0040.