A Suze Orman exclusive

Just Say No to JTWROS
Now, I want to anticipate one argument you might hear which goes something like this: You don't need a trust. Just get a will and then make sure you own your property in Joint Tenancy with Right of Survivorship (JTWROS). I have seen this mentioned in a national magazine and it is stupid, stupid, stupid.

Yes, it is indeed true that if you own a piece of property in JTWROS when you die the house doesn't have to go through probate; it automatically transfers to whoever is on the title to the house.

But things can get quite thorny. With a JTWROS, for instance, you don't have full control over how your share in the house is handed down to your heirs. Let's say you're in a second marriage and you and your new spouse are living in the house from your first marriage. When you die, you want your new husband to be able to stay in the house, but when he dies or the house is sold, you want the house or the money to pass on to your kids. Even if your will clearly spells all this out, if the house is owned in JTWROS with your new husband, upon your death he will become the sole owner of the house. JTWROS overrides the wishes of any will. He could leave the house to his kids instead of yours. With a revocable trust where the house is held in your trust name alone, you can clearly designate what happens with the house when you pass.

Or what if you are a single parent and you want to make sure your kids inherit the house? To avoid probate you own the home with them in JTWROS. Watch out. Let's say your 20-year-old has too much fun one night and on the way home has a wreck where he badly injures someone. The lawyer for the injured party does his homework and hits the mother lode when he scours the public real-estate record: your home! Because your child is listed as a joint owner, when the injured party sues for damages you could very well be forced into selling the house to make the payment.

Or what if you own a home in JTWROS with your spouse or life partner, and they end up in a coma after a bad rollerblading fall? (Are you getting the sense I have had a few bad rollerblading falls lately?) You have to sell the house because you can't make the mortgage on your salary alone. Since you own it in JTWROS you would need your partner's signature. But that's not possible. So guess what? Off to court you go, for the gut-wrenching experience of having your partner declared incompetent - a process that can cost a few thousand dollars, to boot. Only then can you sell the house. If the house was instead owned in a revocable trust, with an incapacity clause allowing you both to sign for each other, you would avoid all of this ugliness.

Coming Full Circle: Add the Trust, But Keep that Will!
Okay, now that I have convinced you that a revocable trust is the way to go, I have to toss you a bit of a curveball. In addition to the revocable trust, you still need a will. You read that right. No, I am not contradicting myself. Here's the deal. The revocable trust will handle the ownership and disbursement of every asset you put in that trust. But you want to have a "back-up" or "pour-over" will for any asset you may have forgotten to put in the estate. Perhaps you didn't get around to updating the trust to include a new asset you acquired a few years after funding the trust. That's where the will comes in handy; you are ensuring that any extra assets will be "poured over" into your estate upon your death.

And finally, as a practical matter, a will is quite useful for laying out your wishes on a funeral and the disposition of your remains. So please trust me (you knew that was coming, didn't you?) on this. A revocable trust with a pour-over will is the best way to go.