Most couples make the mistake of either not going for a prenup at all or miss out on details on paper that they regret not having discussed before. Time changes things and differences may arise, or there could be conflicts that are better off being ironed out beforehand. Here are some of the most important discussions and questions to be put forward when drafting a prenuptial agreement:
Premarital Assets and Debts
As the name suggests, this includes any assets that you’ve acquired before getting married. It is valid for a wide range of items, including jewelry, property and savings that may in any of your accounts. A prenup requires you to fully and fairly disclose your assets as well as any debts you may owe.
There are considerations, such as the status of the property. Separate property can become a joint property or remain that way. In the unfortunate event of a divorce, how will you split up these assets? If premarital debts are paid by one spouse, will it be a gift or can it be reimbursed?
Marital Property and Management of Assets
Once you’re married, the two of you will acquire income and assets separately later on. There’s a series of questions that a family lawyer will ask you. How will all of it be divided? What arrangement will you use and will it be split among the two of you?
You will also have to decide who will be handling the finances and making calls on the purchases. The one who will be paying the bills, your individual goals for the long-term regarding finances. Will your bank accounts be separate or jointly owned as well?
A big mistake that couples make is not asking questions regarding their career decisions. It has to be on paper if both of you will be working, what kind of incomes do you expect and if there are any plans to continue working after you have children. These can often require a family to move from one area to another to be closer to the workplace, which also is an essential point.
All of it seems trivial but can affect the state of your marriage moving forward.
In the event of a divorce, the duration and limit of the spousal support has to be decided beforehand. You may also consider some stipulations beyond those that are stated by the area you’re residing in as it seems feasible. A capable family law attorney will help sort these discussions out.
Acquiring Legal Services
Because of the excruciating details that have to be considered for marriage, couples tend to do best when they work with an experienced family lawyer that can sort out prenuptial agreements thoroughly. At Ledwidge & Associates, we help couples sort out the details before they make any vows.
Holding a joint account can make a lot of financial sense in certain situations. Although joint bank accounts carry with them some potential for misuse, the convenience and benefits they offer generally far outweigh the risks.
In recent times, they’ve also been promoted as an attractive way to minimize probate proceedings after the death of one of the joint account owners—but are they as useful as they’re made out to be? What’s payable on death? Are there any complications which could affect what happens to the account?
As with any matters involving New York probate law, an overabundance of caution is always advisable. In this article, we’ll explain the common uses for joint accounts, what will happen to them upon death, and what ramifications they have on probate proceedings.
What Are Joint Accounts?
At its simplest, a joint account is a bank account held by two people, who then have the same rights of access to the funds. Permission isn’t required by the other party to make transfers out of the account, regardless of who deposited the money there in the first place.
This type of account can be useful in a number of scenarios:
- As a secondary account that children or other relatives can draw on
- As proof of a de facto (common law) relationship for immigration or visa purposes
- For sharing of funds between you and your spouse
- To help manage the financial obligations of an elderly or infirm relative
- To provide easy access to funds if one account holder becomes incapacitated
Convenience Versus Right of Survivorship
The most important distinction to note between types of joints accounts is whether it’s a “convenience” account or an account with “right of survivorship.” This is generally determined when the account is first created, and the vast majority of accounts fall into the latter category.
Sometimes this is indicated by the acronym WROS (With Right Of Survivorship) or JTWROS (Joint Tenants With Right Of Survivorship) in the account title. If it isn’t, you’ll need to ask your bank to find out what type your joint account is.
Who Will Inherit the Account
When a joint account holder becomes incapacitated or unable to withdraw funds for any reason, the other account holder can typically use the bank account just as they did before. The same is true if the joint owner dies, but only if the account is one with “right of survivorship.”
In this case, the joint account is not subject to probate proceedings and is not considered part of the deceased’s estate. Since it’s not part of their estate and, therefore, no longer their property, then it also means that it can’t be bequeathed or otherwise transferred as part of the execution of a will. The sole owner can also then close a joint bank account after death.
On the other hand, if the bank account is specifically marked as a “convenience” account, the other owner will no longer have access to the funds when one owner dies. Instead, the entire account and any contained funds will be treated as the deceased’s assets and, thus, part of their estate, subject to the probate of the will.
Paying Off Debts
Outstanding debts are settled as part of the distribution of the deceased’s estate. This means that if the joint account passes on to the surviving owner, and it doesn’t become part of the estate, then it can’t be used to pay off creditors. If it’s an account of convenience, then the remaining funds will be added to the estate and, therefore, will be liable to be used for debt settlement.
The one exception to this is if both the deceased and the co-tenant of the joint account were also co-signatories on a loan. In this case, the surviving owner of the joint account will be held liable for any remainder of the debt that cannot be paid off by the estate.
Assuming the joint account is one with right of survivorship, as most are, then it will not attract a probate tax. However, there are three other separate taxes that the account will have a bearing on.
The estate tax is a federal tax on the entirety of the deceased’s estate, also known as a gross estate. The gross estate includes both probate assets (those handled by a will) and non-probate assets (those not controlled by a will, such as jointly owned properties and life insurance payouts).
As a non-probate asset, joint bank accounts on death are subject to estate taxes. There are estate taxes on both the federal and state level, although the exact rate varies from state to state.
Inheritance tax differs from estate tax in that it is a levy not on the entire estate, but on individual property or assets passed on to inheritors. While the estate tax is paid out of the deceased’s estate, the inheritance tax is paid by each individual on their share of the inherited property.
In theory, this would also apply to the person who gains sole possession of a joint account. In practice, this tax is currently only applicable in six states: Nebraska, Iowa, Kentucky, Pennsylvania, Maryland, and New Jersey. The tax rate also depends on the proximity of the relationship of the inheritor to the deceased—a spouse, for example, often pays no tax.
In most cases, income tax will be negligible on a standard checking or savings account. However, if it’s a joint investment account with high returns, you’ll need to be careful with how you report any income generated.
The income generated before the death of the joint account tenant must be reported in the same way that it was in prior years. So, if both account holders reported 50% of the income each on their tax return, the same would be done on the deceased’s final tax return.
As soon as the joint account transfers to a single owner, however, that owner is then responsible for reporting the entirety of the income on their own income tax return.
The execution of a will can be a complicated, emotional affair, especially if not every document and asset has been managed properly. That’s why it’s vital to find out what kind of joint account you hold and to thoroughly document your intentions for the account before anything happens.
All it takes is one missed detail. Consider an example where a single family member is using a joint bank account to pay their elderly parent’s bills. They may inadvertently end up with all the money when something happens, causing friction with family members and others who feel entitled to their fair share. In the worst case scenario, it can result in lengthy and costly litigation brought about by the aggrieved parties.
Leave a Legacy, Not Confusion
Don’t leave a valuable estate open to interpretation. Hire a professional and meticulous estate planner that can take full care of you and your family. With over 20 years of experience, Queens probate lawyer Joseph A. Ledwidge PC can help executors, beneficiaries, estate holders, and trustees with a wide range of estate and probate matters.
Across New York, we deliver clients the outcomes they need at rates they can afford. Call (718) 276-6656 to find out how we can help you, too.
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