The First Show

In the initial segment of the show (on Friday, July 2, from approximately 4:40 p.m. to approximately 4:55 p.m.), I introduced myself and my multi-state, three-office law firm, Sawyier & Williams, LLP.

I then briefly discussed a number of common misconceptions about wills.

The first is the misconception that wills can affect the disposition of property that is jointly owned by the “testator,” i.e., the person who makes the will, and one or more other persons at the time of the testator’s death. The fact is that, regardless of the intentions of the deceased joint owner as expressed in his or her will, the will has no effect on such property. Property that is held in joint tenancy with right of survivorship (“JTWROS”) passes to the surviving joint tenant(s) upon the deceased joint tenant’s death, automatically, by operation of law. The same is true of property held in “tenancy by the entireties,” a special kind of joint tenancy between spouses. Only by converting joint tenancy into a “tenancy in common” prior to the death of the testator - - something that can not be done without the consent of the other spouse in the case of property held in tenancy by the entireties - - can a testator subject his or her share of commonly held property to the terms of a will. Only in that way can commonly held property be “probate property” subject to a will.

There are also major asset protection concerns about such joint tenancies except for tenancies by the entireties between spouses.

This is one reason why property owners should be cautious about establishing joint tenancies, especially if they are not with their own spouses.

The first full program of the year, on Friday, July 16, will deal with asset protection in general.

For the present, though, on the subject of misconceptions about wills, the key point to remember is that a joint tenancy is not affected by a will.

A second common misconception about wills is similar to the first; it is the belief that wills can affect contractual benefits covered by “third-party beneficiary designations” (such as benefits under insurance or annuity policies, retirement plans, bank or brokerage accounts, or indeed any contractual rights that provide for their benefits to go to another person upon the owner’s death). Again, the July program as well as the August program will deal with the asset protection aspects of such third-party beneficiary designations of contractual rights.

For the present, the key point to remember is that all these beneficiary designations also result in the automatic transfer of ownership of those benefits to the designated beneficiary upon the prior owner’s death, regardless of the terms of the prior owner’s will. All such property also is not considered to be probate property. This fact is all the more important to remember because of the vast range of property, including even real estate, now covered by Indiana’s comprehensive Transfer on Death (“TOD”) statute.

A third common misconception about wills is that, at least in the case of the only kinds of property -- probate property –- to which they apply, they can operate to transfer title by themselves, without a probate court order. This is not the case except for estates in which the net value of the probate property is $50,000 or less, so that the Small Estate Affidavit procedure may be used. (The Indiana statute providing for such affidavits is included at the end of this blog.)

One goal of trust-based estate planning is to keep the total amount of even the wealthiest clients’ probate property (separately owned property not in trust and not covered by third-party beneficiary designations) beneath this $50,000 limit so that there will be no need to open a probate case merely in order to transfer such property.

A fourth common misconception about wills is that, if they nominate guardians for the minor children of the testators, those guardians will be empowered to act as such upon the death of the testators (if neither parent is then alive). Again, wills do not have such effect. Instead, the nominated guardian must petition the probate court to be appointed by that court with those powers.

The resulting gap in legal authority to act as guardians is a problem that the Porter County Bar Association Trust & Estates Section -- of which I am the chairman -- is presently seeking to correct by means of a proposed amendment to Indiana’s short-term guardianship law. That amendment would enable parents to appoint a short-term guardian for their children for a period of up to one year following both parents’ death or incapacity, and have such appointments take effect without any court order. (This proposed statutory change would track Illinois’ statute on the subject.)