Combining spousal accounts

If one of the joint account holders is untrustworthy, it can be a complete hassle with accounts being drained.

IRA and Roth accounts are for individuals, AFIK. My spouse and I have the taxable investment account and two checking accounts jointly. We split our income into the two different checking accounts using one for daily expenses and the other for utility bills.

If one spouse becomes unable to write checks, the other can still access the account without having to go through red tape.

-- Ron

Another advantage is that, upon the death of one spouse, the account immediately becomes the sole property of the other without having to go through probate and be distributed according to a will. This could be a plus in the unfortunate situation the spouses have neglected to make a will, or if there are disputes among heirs as to provisions of a will.

We have made a will, and our financial adviser says that a trust is not needed in our particular case, but probate (time and costs) still bothers me a bit. My wife and I like to travel a lot together and a major crash that takes both of us simultaneously and unexpectedly is not out of the question. How is that handled? We have made our eldest executor of the estate divided equally among the 3 kids and secondary beneficiary on all our accounts. Good enough?

Chip

Big Snip

If the estate is just money that will work but if there are going to be disputes about who gets the "other stuff" then hopefully the two youngest will still be talking to the eldest after distribution of assets .

One of the big advantages of a revocable living trust has nothing to do with probate. It is the ease with which your property can be controlled in case you become incapacitated. My mother has a trust, and was trustee, managing her own affairs quite well until she started suffering from dementia. At that point, it was necessary for her to move into a dementia/Alzheimers facility, and it was clear that she was unable to manage her affairs. If she had not had a trust, it would have been very difficult to sell her house and car, or manage her investments. We would have had to take her to court and had her declared incompetent, something that would have been emotionally very hard on us. With the trust, all that had to happen was for her to resign as trustee. The bank trust department she had named as successor trustee took over managing her affairs, and her house and car were easily sold. Some say that a power of attorney would have been enough, but I understand that financial institutions and other entities may refuse to accept a power of attorney.

Dave

That sounds good. One thing that is sometimes overlooked is that the executor is entitled to a reasonable fee for his or her services. You might want to discuss that point with the 3 kids in advance and settle on a fee, so that there will be no disputes or ill feelings later. Depending on the size of the estate and its complexity, an executor's fee of 5K or 10K is not unusual. For a sizeable estate, it could be a lot more if done by a bank or a lawyer. So having it done by a family member is a good idea, provided everybody agrees in advance.

A valid point. Your own counter point below is that it facilitates access (in case of disability, not death) if the joint account holder are trustworthy.

Yes, as are HSAs. A good point - that each individual still retains some separate assets.

Trusting fools :-)

Another poster (Don) mentioned avoiding probate. This can be achieved with separate accounts and POD/TOD designations. Curiously enough, community property is still generally subject to probate - it's basically treated as "shared" property during life, but at death, the spouses can each will their half away (i.e. no right of survivorship). So even if one combines into a single account, one can still face the probate issue. In the last decade, another form of joint ownership, community property with right of survivorship, has been created to address this issue. See, e.g.

Mark Freeland snipped-for-privacy@nyc.rr.com

snippage

Give me a minute to climb up on my soap box -

Probate is nothing to fear AND in the vast majority of cases the cost to probate an estate may well be CHEAPER the costs of avoiding probate.

The most commonly sold method to avoid probate is the revocable living trust. This will work BUT it requires at least two things:

First - a trust document. This won't be cheap if its done properly. Living Trust Documents that you can rely on will cost at least a couple of thousand dollars and can easily be more than that.

Second - funding the trust. The document is useless until the trust is funded. To fund the trust you have to change the title to all the assets that you want in the trust. AND if you miss one - for example, say you forget to change the title on your car OR you open a new bank account and put it in your name instead of the trust - guess what? You get to do the probate thing ANYWAY.

Trusts are a great way to deal with out of state issues - for example, if you live in Maryland but own property in California a trust will be considerably easier to administer than probating the estate. But for this, there are other, easier and cheaper ways to avoid probate.

For example: A - never put your kids on your checking account as JOINT. Instead, list them as Pay On Death Beneficiaries AND list then as Courtesy Signators. A courtesy signator can sign your checks to pay your bills, but it is not their money till you die. This protects your money from their transgressions;

B - list your beneficiaries as POD or TOD (transfer on death) on your investment accounts. When you die they pass outside of probate;

C - there is even a way to transfer your real property to the beneficiaries NOW while you retain completely control.

Many here will say that a living trust allows for someone to handle your affairs in case you become incapacitated - so does a Power of Attorney, and it costs a LOT less.

Good luck, Gene E. Utterback, EA, RFC, ABA