Till Death Do Us Part. What is Yours is Mine (isn’t it?)

In Estate Planning, Financial Planning, HNW client, Investing, Real estate, Traverse City by Trent Grzegorczyk

Courtney Marshall – Swogger, Bruce & Miller PC

A common misperception among married couples is that from the day “I dos” are exchanged, the two individuals become one in the eyes of the law.  This is especially true for many clients who have been married for fifty, sixty, even seventy years.  They just assume that ownership of an asset by one spouse means automatic ownership of that asset by the other.

Unfortunately, this is an incorrect assumption and a marriage certificate is not a free pass for authority or ownership over assets owned solely in the other spouse’s name.  Often, couples do not realize this fact until the death or incapacity of a spouse.  At such time, the surviving or competent spouse is left frustrated and stuck navigating the legal spider’s web trying to gain authority over the other spouse’s assets.  Most of the following examples could have been prevented with a little pre-planning on the couple’s part, i.e. adding the spouse as a joint owner, or preparation of a durable power of attorney, durable power of attorney for health care, and/or last will and testament.

Title to Real Property Only in Incapacitated Spouse’s Name  

One common example when a durable power of attorney is necessary is when husband holds title to a hunting cabin (or cottage or rental property, etc.) solely in his name.  Husband later becomes incapacitated and his wife decides she needs to sell the real estate.  Wife finds a buyer for the property and goes to execute a deed to the new buyer.  However, when she attempts to sign the deed, the title company (or buyer or register of deeds, etc.) realizes that she is not a titled owner.  Wife still tries to sign as Husband’s spouse.

However, the law does not recognize Wife’s authority to act for her husband solely by virtue of her status as his spouse.  The title company asks to review a copy of husband’s durable power of attorney granting her authority to act in his place.  Wife responds that husband never executed such a document.  What then are her options?  At this point, because she is not a titled owner or husband’s power of attorney, wife must petition the probate court to be appointed husband’s conservator.  Wife, as the court-appointed conservator, must then receive approval from the probate court to sell the real estate, provide an annual accounting to the probate court of husband’s finances, etc.  This continuing court oversight of husband and wife’s financial affairs is likely not what the couple intended.

If husband and wife had executed a durable power of attorney for financial affairs, Wife would have had authority to act for Husband and appointment of a conservator would not have been necessary.

Spouse Dies Owning A Bank Account Only In Their Name

Wife opens a savings account at local bank.  She forgets to add Husband as a joint owner or name him as the “transfer-on-death” beneficiary.  Wife dies.  Husband goes to the bank to withdraw the balance and close the account.  Bank tells Husband he does not have authority to access this account, only the Personal Representative of Wife’s estate may access it.  Husband then needs to petition the probate court to be appointed Wife’s Personal Representative.  This account is then included in Wife’s probate estate and is subject to Wife’s creditors, i.e., Wife owed $10,000.00 in credit card debt and the creditors now seek to recover this debt from the Wife’s estate.  Thus, Husband may or may not be entitled to the balance of this account.  Again, this situation could have been avoided if Wife had added Husband as a joint owner or named Husband as the beneficiary of this account.

The moral of the story is that it is important, even for a married couple, to make certain that you have an up-to-date estate plan which will protect both you and your assets in the event of both incapacity and death.  Even if you have documents in place, it is recommended that these documents be reviewed once every three to five years with your trusted legal professional.   If you have any questions or concerns regarding these issues, we offer a complimentary one-hour meeting to discuss any estate planning concerns.  Please feel free to contact our office at 231-947-6800.

Contact Courtney Marshall for your estate planning and other legal needs by heading over to her website.

MICAPITAL is a boutique private wealth planning firm specializing in serving an exclusive group of affluent and HNW individuals and families.

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