Pitfalls in Using Joint Ownership to Avoid Probate, 0122 SCBJ, SC Lawyer, January 2022, #46

• Author: By Erica Odom Chapin
• Position: Vol. 33 Issue 4 Pg. 46

Pitfalls in Using Joint Ownership to Avoid Probate

No. Vol. 33 Issue 4 Pg. 46

South Carolina Bar Journal

January, 2022

By Erica Odom Chapin

Whether you are an estate planning lawyer, real estate lawyer, or family lawyer, issues of joint ownership often arise. One of the biggest appeals of joint ownership is the avoidance of probate administration. Clients often want property or accounts to pass automatically to their spouse or another family member at death without the hassle and delays inherent in probate. However, clients need to be aware of the potential pitfalls in using joint ownership to avoid probate. This article will address some of the many factors that should be considered and weighed before drafting a joint tenancy with right of survivorship deed or advising a client to hold joint accounts.

What does probate administration really mean for the client?

Clients have a varying degree of aversion to probate administration. Some clients may have had some type of negative experience with probate after a family member’s death. Some clients may feel overwhelmed by the process and not want their children or whomever they are naming as Personal Representative to have to deal with the paperwork. Others are concerned about probate fees. Often, clients are concerned about the delay with their loved ones being able to receive distributions of their assets.

It is a good idea to take these concerns one at a time and discuss them with the client. For example, it is important to discuss the probate fee schedule with your clients. Although the fees can be significant, the fees are often less than clients expect. The rates used to calculate the fees are a far cry from those used in calculating income or estate taxes!

For example, the fees for an estate between $60,000 - $99,999 are $95. The fees for an estate between $100,000 and $600,000 are $95 plus 0.15 percent of the property valuation between $100,000 and $600,000, which equates to $320 for a $250,000 estate and $695 for a $600,000 estate. For estates larger than $600,000, the fees are calculated the same as described above for the first $600,000 plus 0.25 percent of the property valuation above $600,000. So, the fees for a $1 million estate are $1,845, while the fees for a $5 million estate are $11,845.^[1] The fee calculations are quite modest compared to estate tax rates of 18 to 40 percent.^[2]

A typically more important factor for clients is the concern that family members will have to wait a long time to receive assets after the client’s death. The probate process can easily take a year or more. Generally, distributions should not be made until after the creditor’s claim period has expired. Creditors must present their claims within eight months from the first date of publication of the creditor’s notice or one year from the decedent’s death.^[3]

Clients also don’t want their family members to have to deal with all of the forms required by the Probate Court. Utilizing an attorney who practices in the probate administration area can be very helpful but potentially expensive. Preparing an Inventory, Accounting, etc., can take considerable time and effort.

However, using joint ownership to avoid probate does not always help clients achieve what they are trying to accomplish and can lead to unanticipated problems. This article will address two major categories of assets that are often held as joint assets: real estate and bank accounts.

How should real estate titles be held to avoid...