I can't tell you how many people tell me that they are not worried about estate planning because they own everything jointly with their spouse, so it doesn't really matter.
Here are a few reasons why that kind of thinking costs thousands of dollars (at least):
1. What if you both die at the same time?
If you and your spouse die in the same accident and you have no planning in place, you're looking at spending a heck of a lot in probate fees. We estimate right now that probate costs approximately five (5) percent of your gross estate value. So (to give a little perspective) if all you own is a house worth $500,000, you're paying $25,000 to the court and your personal representative, possibly more when you take attorney's fees into account.
And that's not all. If you have minor children when you die without any planning in place, your kids are each going to get their share of inheritance when they turn 18. Yes, the law requires this! The law also does not discriminate with age when it comes to inheritance. So, your 20-year-old son and your 2-year-old son will inherit the same amount of money! Not what most parents would have wanted.
2. You could miss out on certain tax advantages only afforded married couples.
When you plan for death with joint ownership, what you effectively do is delay tax payment. What you lose when you plan this way is the tax benefit that married couples are afforded. Each person has a certain tax exemption when it comes to paying estate taxes ($3.5M for 2009, No tax in 2010, then $1M in 2011 and beyond). But with joint ownership planning, you lose one of those exemptions all for the sake of delaying payment. Each married couple should be planning for two tax exemptions. It might not be worth it in your case to lose that all for the sake of delaying any payment.
3. Your assets are not protected after your death.
If you die before your spouse and own everything jointly, you're leaving an unprotected estate to your spouse and kids. If your spouse has creditors, they can reach all of the estate. If your spouse remarries then divorces, he or she may lose some of your estate to the ex. Or, if your spouse remarries and dies, there's no guarantee your kids will see any of that inheritance. Even if your spouse doesn't remarry, if he or she doesn't do any further estate planning, after his or her death, your children will receive their inheritance outright and unprotected. So, your child's creditors or ex-spouse may have a claim to it.
Planning with a Revocable Living Trust is a far better way to go. You retain lifetime control over your assets, but leave a much cleaner situation for those you leave behind.