Think you have a simple estate? Think again.

Those of you out there who may think that they have a simple estate: even if you do, that doesn't mean your estate plan can or should be "simple". Just because your assets are not "sophisticated" or of high net worth, doesn't mean your estate plan should at the very least be SMART AND EFFICIENT". In other words, even a small estate requires a fair amount of thought and planning. I'm talking about common methods to try and short circuit the probate process: using joint ownership and beneficiary assets (life insurance, IRAs, annuities, POD and TOD accounts) to avoid probate - depending on the facts and circumstances, your "simple" estate plan may land your beneficiaries in court and end up costing them thousands of dollars to unravel. Often, clients will tell me that at least one of their children is on all of their bank accounts and have been added to the deed for a house, “So I don't need a will or a trust, right?"

Note these following pitfalls:

  1. Your assets may be taken by a child's creditor or divorcing spouse. If your child gets sued or fails to pay his or her bills, then a judgment creditor may try to take all or part of your money and property to pay off your child's debts. There's also the possibility that your child's divorcing spouse will come after your money and property as part of the divorce settlement.
  2. Your children can wipe out your bank and investment accounts. As a joint owner of your bank and investment accounts, a child can withdraw all of your money, take it to Vegas and lose it, and never look back.
  3. Your children won't be able to sell your real estate. Even if you've added your children's names to the deeds for your real estate, they won't be able to sell any of the property without getting your signature on the deeds. While this may appear to be a good thing - they can't sell your house out from under you - it can become a problem if you were to become mentally incapacitated and some or all of your real estate would need to be sold to pay for your care but legally you would be unable to sign the deeds.
  4. You could cause an unequal distribution of your estate. If you have more than one child and you have not added each and every child's name to each and every account and each and every deed for your real estate, then your estate will be distributed unequally after you die. This will be true even if you have a Last Will and Testament that states that everything goes equally to the children. And even if your children agree to divide everything equally, they'll need to be aware of the gift tax consequences of divvying things up.

The bottom line - in the end, your simple estate plan may very well end up being a time-consuming and costly court case. Only a qualified estate planning attorney can help you decide if your simple estate plan will really work the way you want it to work.