Legally, probate is the process of authenticating the will of a deceased person, reviewing their…
THERE ARE FOUR BIG DANGERS TO HAVING ASSETS IN JOINT NAMES
Often, older people will add the name of one or more of their children to their checking accounts or brokerage accounts .They might do this to make it easier for the children to help them with their financial affairs. Or they might think that it’s a clever way to avoid probate.
Joint ownership can be good in some cases, but there are dangers in setting things up this way.
To illustrate, imagine that Anna has three children -Barry, Louise, and Todd -and she adds their names to some of her various accounts so they can help her with her finances. What could go wrong?
- A CHILD’S DEBT | Suppose Barry loses his job, and runs up large debts. Since Barry is a joint owner of one of Anna’s accounts, his creditors could poten tially come after Anna for repayment Or suppose Barry owns a business and guarantees a loan.If the business goes under, Anna could be on the hook.
- A LAWSUIT | Suppose Louise causes an auto ac cident, and the injured driver sues her. The driver might be able to empty Anna’s bank account as well as Louise’s.
- A DIVORCE | If Todd gets divorced, his wife could potentially claim some rights over a joint account. If Todd’s wife makes a claim to divide an account, Anna might be required to trace and prove the entire his tory of her contributions to it.If she can’t do so, then Todd’s wife might have a claim on it.
- A FAMILY FIGHT | When Anna dies, any assets in her joint accounts will go to the co-owners named on those accounts. If Anna has a will that divvies up her other property, it won’t cover the joint accounts. If Anna intended to ultimately split her property evenly among her children, that might not happen. And even if one sibling wants to make things right and offers to even things up with the others, this might create gift tax problems.
An estate planner can suggest alternative ways to avoid probate and allow children to help with finances.