Question: If I want an amount of money to go to heirs (for example, $300,000), can I put this in both my name and my sons' names as JTWROS (Joint Tenants With Right Of Survivorship) so they'll get it upon my death?
Answer: The fact is that you can put your sons' names on nearly any assets that you want (as JTWROS). The question is whether or not it's an appropriate thing to do. I think the best response is to give you a couple of examples about what might happen.
In fact, here are a few questions that would be good to have answered to more accurately respond to your question?
* How old are you? What is your health like?
* Why would you want to give that much money away now?
* Do you need the money to live on now or later?
* How much of your total estate is the $300,000?
First, be aware that if you put your sons' (let's say two sons) names on the $300,000; then technically you have made a "gift" of 21/43 of the money - and it's gone. If that $200,000 is a large part of your estate, a few problems might arise. If you believe that "getting the money out of your estate" will help you qualify for Medicaid to pay for potential nursing home costs, for example, you are mistaken.
Nursing Home Consideration Currently, any asset given away within three years of entering a nursing home is calculated back into the estate when determining financial need. In the past, this "gifting" strategy was used to spend down an estate, but it is long since outdated - and even dangerous.
If you give $200,000 of your money to your sons, and then you need it to live on later, they have absolutely no legal obligation to give it back. You could be stuck with a big bill for extended care and no money to pay for it.
If the $200,000 is a smaller portion of your estate, the picture changes somewhat.
>From the articles published earlier in BEEF, you know that you can pass on the first $625,000 of your assets with no federal estate taxation. Thankfully, this estate-tax exemption will increase each year between now and 2006. However, it can be used only once - either during your lifetime, atyour death or through some combination of the two. In addition to this lifetime exemption, you are allowed to give away up to $10,000 each year to anyone that you wish.
Appreciating Assets? If your total estate value was $1 million and you give away $200,000 now and die later this year; there would only be $425,000 of your exemption remaining that could be used at death. This may or may not be a problem. If the rest of the estate were made up of assets that had really appreciated, the remaining exemption of $425,000 might be insufficient to cover them. It might have been better to get those "highly appreciating" assets out of the taxable estate to avoid a large potential estate tax.
Perhaps, because of the nature of the estate, it would make more sense to just let the sons inherit the $200,000 at your death. Or, if you're in relatively good health and want your sons to have the money to be able to pay federal estate tax and/or state inheritance taxes, as well as other closing and settlement costs, then using some of the money to purchase insurance makes more sense. (The money can be leveraged considerably by owning it outside of the taxable estate.)
I hope this gives you some ideas.