My wife, 72, and I, 80, have two houses and 56 acres of land. Our daughter is a joint tenant on our real estate. Do we need a will?
‘Our adult daughter is the beneficiary of our life insurance, power of attorney on all our bank and investment accounts and joint tenant of all our real estate.’ (Photo subjects are models.) – Getty Images/iStockphoto
My wife and I own a business, two houses and a commercial building on three parcels of real estate totaling about 56 acres. We have no debts — the real estate was paid off a long time ago, the business always pays within terms, and we have substantial cash for retirement.
I am 80 and my wife is 72. Our adult daughter is the beneficiary of our life insurance, has power of attorney on all our bank and investment accounts and is a joint tenant of all our real estate. We have long-term care insurance for my wife, but for various reasons, not for myself.
We are in excellent health. In fact, we are in better shape than most of our 30-years-younger employees. There are no other family members we want to give money to and no organizations we want to support. We have made our wishes known already — our daughter gets it all.
Are there any compelling reasons to have wills?
Wrapping Up Loose Ends
It’s almost always a bad idea for parents to add children to the deed of their property during their lifetime, although it’s an easy mistake to make. – MarketWatch illustration
You have done a lot to clear the path ahead — but you have made one big mistake.
First, the bad news: It’s almost always a bad idea for parents to add children to the deed of their property during the parents’ lifetime, although it’s an easy mistake to make. In addition to giving away part ownership while you are still alive, your daughter loses the advantage of the “step-up in basis.” You could instead leave the land via a transfer-on-death deed to avoid probate.
Unlike assets co-owned by children, assets inherited by children are passed on through a “step-up in basis,” which means that capital gains are based on the property’s current value, rather than the original purchase price. So if your daughter remains on the deed of your properties, she won’t receive this significant tax advantage on your share.
As I told this reader earlier this year, you can either name your daughter in a will or in a revocable trust, or leave her your property via a transfer-on-death deed. If she inherited the property via one of these methods, she would receive the step-up in basis. Fixing this issue now is more important than whether or not you have a will.
Story Continues
Now, the good news. You have created a financial power of attorney. I trust you have done this with the help of an attorney. As my MarketWatch colleague Beth Pinsker pointed out, it is complicated. You can read “The Power of Attorney’s Notebook.” You may also wish to reassess your investment portfolio from time to time, given your good health.
You don’t mention an advanced healthcare directive, which informs your doctors what action you want them to take if or when you are unable to make those decisions yourself. You may wish to list your wife as your healthcare proxy to carry out those decisions, and vice versa. Serious medical issues can put pressure on a marriage, as this couple discovered.
Also, ensure you have a successor to your wife on both your POA and healthcare directive. Review your pension survivorship benefits and the survivorship income to your spouse, and examine the schedule of daily and monthly benefits in your long-term care policies, in addition to definitions of home care and assisted living care.
You invested wisely in long-term care (LTC) insurance. (It sounds like you did not take out shared policies.) But having an LTC policy will help alleviate the potential financial burden that lies ahead. Nursing-home care costs can vary dramatically depending on the type of care, state and institution (up to $125,000 a year).
It doesn’t hurt to have a will, especially if you have any other non-probate assets like automobiles or some other valuables that are hidden away in a safe-deposit box. If you have one daughter, the laws of intestacy would ensure that your estate passes to her regardless. In the meantime, talk to your attorney about your real estate holdings.
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