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Abstract: This case study focuses on a how a family's assets were

acquired and titled in relation to the distribution of the assets upon the death of the husband or wife to their designated heirs. This case will incorporate the knowledge of Property Interest, Community Property, Methods of Property Transfer and the Probate Process.


Introduction: Peter and Kate Gabriel are a married couple that are currently 67 and 64 respectively. This is Peter's second marriage and he has a son from his first marriage named Tony. Peter and Kate have 2 children of their own named David and Paula. Each of the 3 children have one child, so Peter and Kate also have 3 grandchildren. Peter and Kate just retired to California and were previously living in New Jersey.


Current Situation: Peter and Kate are starting to get their estate documents in order and want to make sure that their assets will transfer in the manner they wish and that they are fully aware of the probate process in relation to their assets. They have asked you to evaluate their current titling of assets in relation to their wishes on how to transfer assets. The family tree looks like this...

Peter and Kate


Tony                                                   David                                                  Paula

(Son from previous marriage)                           (Son)                                                   (Daughter)      


Tony Jr.                                               Sarah                                                Ged

(Grandchild)                                        (Grandchild)                                        (Grandchild)


In a perfect world, Peter and Kate have heard that they would be best to avoid the probate process. They are not sure why this is the case, but the person that told them has a great amount of credibility with them. As for the distribution of their assets, they want to make sure that both David and Paula share equally in the assets when both pass away. However, Peter is concerned about his first child Tony. He wants to make certain that Tony and Tony Jr. are also taken care of to some extent and wishes to give them $100,000 at his death. Kate is not too fond of Tony, and Peter is concerned that if he passes away first, and all the assets go to Kate, that she may not take care of his wishes for Tony and Tony Jr.


Financial Information: Below is a listing of current assets along with the current account titling and comments about some of the assets.

Asset

Titling

Amount

Comments

Checking Account

JTWROS

$30,000

Community funds

Savings Account

JTWROS

$120,000

Community funds

Investment Account

Solely Owned - Paula

$150,000

From an inheritance

Investment Account

JTWROS

$300,000

Community funds

IRA Account

Peter

$130,000

Peter's estate is beneficiary

IRA Account

Kate

$120,000

Kate's estate is beneficiary

401(k) Account

Peter

$500,000

Beneficiary is Kate

401(k) Account

Kate

$600,000

Beneficiary if Peter

Home

Peter

$550,000

Bought with community funds

Total

$2,500,000


Assignment: You have been hired to be Peter and Kate's financial planner and they have asked you the following questions regarding their assets:

1.    Explain how the assets will transfer at death and which assets will require to be probated with the courts? Explain to Peter and Kate the pros and cons of avoiding probate so they confirm what they heard from their trusted friend.

2.    Is there a way to avoid probate all together by changing the titling of the assets or transferring ownership prior to death? What are the consequences of doing so?

3.    With the move to California, are there any issues now that they will be living in a quasi-community property state? If there are issues, what should Peter and Kate consider since they want to avoid probate from what they heard. Does it make sense to have avoiding probate as a goal?

4.    How should Peter guarantee that Tony gets his $100,000 at Peter's death? Will there be issues with the way the accounts are currently titled? Can Peter simply change beneficiary designations in his IRA and/or 401(k) accounts being that he is married? Should Peter consider gifting assets to Tony while he is alive?

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