Question: My wife is 72 and I am 78. Of late, she has been complaining to me that not enough of our property is in her name. While we don’t have enough to be paying any estate taxes, during our 47-plus years of marriage, for one reason or another, most of the assets we have acquired have been put in my name. I have tried to explain to her that if I die before she does, my will provides that she gets everything, and if she dies first, our two children get it all. I can’t seem to get it through her head that it makes no difference how the property is titled because the survivor of us gets it all. Am I missing something here?

Answer: Yes. First of all, after 47-plus years of doing it your way, your wife is having understandable issues with financial security – that is, if you die or become incapacitated and she has nothing in her name, how will she pay her bills?

The solution: If you sign a durable power of attorney giving your wife access to the accounts and assets in your name and allowing her to utilize these to provide for herself should you become unable to manage your affairs, part of her concern will probably be alleviated.

Her other concern, we believe, is that if you die first and your estate goes through the probate process, she will have no control over the funds and will not be able to pay her bills. The solution here is to either establish one or more bank accounts in her name alone, or make gifts to her of joint interests in your assets. By making gifts to your wife of joint interests in property titled in your name, you will probably not create any gift or estate tax consequences because of the unlimited marital deduction; however, you may be creating unintended income tax implications if you place her name on assets that have appreciated in value – such as stock, real estate, and almost anything other than cash.

While the primary advantage of creating a joint interest in property with your spouse is to avoid the probate process, the potential disadvantages, we believe, outweigh the advantages. Here’s an example:

If you gift to your wife a joint interest in your stock portfolio that has a cost basis of $10,000 and is now worth $100,000, your wife will receive her half interest at half of your cost basis, or $5,000.

If you die before she does, because your half interest would be included in your estate, it would pass to your wife at a stepped-up basis of $50,000. This means that if your wife then chose to sell the portfolio after your death for $100,000, she would pay capital gains taxes on $45,000 ($100,000 sales price less her basis of $5,000 less the stepped-up basis of your half of $50,000).

On the other hand, if your wife died first and had not held the half interest you gave her for at least one year, you would get her half back without a step-up in basis, meaning that if you sold the portfolio for $100,000, you would pay taxes on a $90,000 gain. If she died first and had held the asset for more than a year, your basis would be $55,000 and you would pay capital gains taxes on $45,000.

However, if you left all of the portfolio in your name and you predeceased her, she would receive the entire portfolio at the stepped-up cost basis of $100,000, meaning that if she sold the stocks for that price, she would pay no capital gains taxes.

The same rationale is true with real estate, including personal residences where the value is more than the capital gains exclusion for a single person of $250,000.

Taking the NextStep: Creating joint ownership of assets may make sense from the perspective of income taxes when the spouse receiving the appreciated asset has a shorter life expectancy than the spouse who owns the account, but is expected to live for at least a year after the transfer. Since you have a shorter life expectancy than she does, and since statistics tell us that you will probably die before she does, your wife may be better off not owning all assets jointly with you.