A husband dies. His will leaves everything to his children from a prior marriage. The $2,000,000 brokerage account (held as joint tenants with his second wife) goes entirely to her. The children get nothing from that asset. Title beats the will every time.
One person holds complete title. Full right to use, sell, gift, or bequeath. At death, the asset passes through the will and goes through probate. 100% is included in the gross estate. The beneficiary receives a full step-up in basis.
A life estate divides ownership of a single property across time rather than among co-owners. The life tenant holds the right to use, occupy, and collect income from the property for life. At the life tenant's death, the property passes automatically to the remainderman named when the interest was created (the vacation home to my wife for life, then to my brother). The life tenant cannot bequeath the property, and the transfer at death avoids probate because the remainderman's interest was fixed from the start.
Common mistakes
- Believing the will controls all assets. JTWROS, TOD/POD, life insurance, and retirement accounts all pass outside the will. If the will says one thing and the designation says another, the designation wins.
- Mixing spousal and non-spousal JTWROS rules. For spouses, always 50%, no exceptions. For non-spouses, default 100% unless the survivor proves contribution. Applying the non-spousal rule to spouses is the most common error.
- TRAP: A $2,000,000 JTWROS account between spouses, you will see $2,000,000 as an answer for estate inclusion. That is the non-spousal rule. The correct answer is $1,000,000.
Bottom line
- Property titling determines who gets the asset at death; title overrides the will.
- Spousal JTWROS: exactly 50% included in the first estate, regardless of contribution.
- Non-spousal JTWROS: 100% included unless the survivor proves contribution (consideration-furnished test).
- Community property provides a double step-up in basis; both halves are stepped up at the first death.
Exam shortcut
When a question specifies community property state versus common law state, that detail is load-bearing, it tells you which basis rule to apply. Community property = double step-up. Common law JTWROS = half step-up only. When a question involves an IRA or life insurance and mentions a will, check the named beneficiary. If the designation conflicts with the will, the designation wins.
The full lesson (about 2,260 words, 15 min read) adds 2 worked examples, all 6 common mistakes, a self-check, free in the app.
Learning objectives
- G.54
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