Dear Len & Rosie,
I have a half-sister in poor health. She wants me to I get everything that is left in her estate when she dies.
Her husband died and left everything to her and they had no children. In addition to me, she has two half-sisters; one who is very elderly and ill and another who is quite well.
She has listed my name only on her will, and my name is on all of her bank accounts as a joint tenant.
She inquired about giving me a power of attorney, but her lawyer said that is was not necessary.
Is this going to work?
Everything that you hold in joint tenancy with your half-sister will become yours if she dies before you do.
You will need only to take a certified copy of her death certificate to each financial institution to remove her name from her accounts. There won’t be any probate for these assets.
But that’s not enough.
If your sister has any life insurance policies or retirement accounts, she should make sure that she has named you as her pay-on-death beneficiary so that upon her death you may collect her life insurance and roll over her retirement accounts into Inherited IRAs.
With an Inherited IRA, you’ll be able to inherit her retirement accounts but you won’t have to cash them in all at once (and pay the income tax all at once) after her death.
Instead, you can take required minimum distributions based on your age, with additional distributions as you see fit, giving you the power to decide when to pay the income tax on her retirement accounts.
If, however, she dies and has designated no beneficiary on her retirement accounts, they will pay to her probate estate and the opportunity for continued tax deferral will be lost.
If your sister owns a home, she should see an attorney and create a trust.
We do not recommend joint tenancy deeds to avoid probate for homes and other land, because if you’re on your half-sister’s deed, she’s no longer in complete control of her home and her home could become subject to a judgment lien from your creditors.
Her lawyer may be technically correct in that she does not need a power of attorney to avoid probate.
But what if she becomes incapacitated?
If she’s ever unable to make decisions and manage her own affairs then a power of attorney is vital.
If you or another trusted person has her power of attorney, she will not likely need a court-supervised conservatorship if she ever becomes incapacitated.
Likewise, she also needs an advance health care directive so that you or another trusted family member or friend can make medical decisions if she’s ever incapacitated.
Len & Rosie