
Loune-Djenia Askew, Esq.
Oct 9, 2024
If you have large, jointly-held accounts with your spouse and a sizeable estate, your Will might not work the way you think it will. Even the best-drafted Wills can fail if your accounts aren't properly titled.
If you have large, jointly-held accounts with your spouse and a sizeable estate, your Will might not work the way you think it will. Even the best-drafted Wills can fail if your accounts aren't properly titled. This is especially important in Florida, where the proper use of estate planning tools like Credit Shelter Trusts can save your family from unnecessary estate taxes.
In estate planning, your Will alone might not be enough. A well-drafted Will may include tax-saving mechanisms, such as a Credit Shelter Trust, which is designed to use your estate tax exemption when you pass away. If the exemption isn’t used, your estate might be subject to more taxes when your spouse dies. However, if your assets are held in joint accounts, this strategy could fail because the assets might automatically pass to your spouse without utilizing the trust.
Example:
Here’s a real scenario involving a Florida couple with a $10 million jointly-held account. The wife’s Will included a Credit Shelter Trust, which would shield $5.49 million (Florida’s estate tax exemption) from taxes when she passed. However, because their $10 million account was held jointly, the entire amount would transfer directly to the husband upon her death. As a result, her exemption would be wasted, and no funds would go into the trust.
Fixing the Problem
To fix this issue, we simply re-titled the account to "tenants in common." This way, when the wife passes, $5 million of the account would be considered her individual property, and $5.49 million could go into the Credit Shelter Trust, protecting it from estate taxes. The remaining assets would pass to the husband. By making this simple change, a significant portion of the estate is shielded from future taxation.
What If This Wasn’t Fixed?
If the issue wasn’t caught, a much larger estate tax would be due upon the husband’s death. In Florida, where there is no state-level estate tax, federal taxes would still apply to larger estates. By not using the Credit Shelter Trust, a larger tax bill would likely be due at the second spouse’s death. In contrast, properly titling accounts ensures that your estate plan works as intended, protecting your family’s wealth.
Properly titling your accounts is crucial to make sure that your estate plan works as it should. If you have sizeable jointly-held accounts, it’s important to review your estate plan with a qualified attorney to ensure your assets are protected from unnecessary taxes.
For more information, contact our office at Askew & Associates, P.A. by calling 954-546-2699.
Disclaimer: this blog post is not intended to be legal advice. We highly recommend speaking to an attorney if you have any legal concerns.