I was speaking with a client recently and we were discussing their jointly owned property. This client owned all of their bank accounts jointly with their spouse, they owned all their investments jointly, and their home was owned jointly with their spouse.
This client told me that they read something online that said that they could make the settlement of their estate very easy if they simply named their children as joint owners on all of their accounts and on their home after the death of the first spouse?
First and Foremost ….. DO NOT PUT YOUR KIDS’ NAMES ON YOUR BANK ACCOUNTS AND REAL ESTATE AS JOINT OWNERS!
There are a number of reasons for this warning. Here is the list of many reasons how engaging in joint ownership of your assets with your children in an effort to make things simple can really backfire!
- Subjects the Account to the Creditor/Predator Problems of the Joint Owner (aka your children’s creditors, divorcing spouses, and other lawsuits judgment creditors can take your property)!
- You Can Lose the Estate Tax and Gift Tax Exemption of the Husband/Wife
- May Not Avoid Probate (incapacity, predeceased, or special needs can result in a joint owner not inheriting the property)
- Creates a Taxable Gift
- Lose the Step Up in Cost Basis at Death
- Circumvents the Wishes in the Will or Trust
However, I can think of one scenario where titling all of your accounts jointly with your spouse may be beneficial … and every single one of these circumstances would have to apply:
- You Want All Assets Outright to the Surviving Spouse
- You Have No Estate Tax Issues and No Chances of Any Estate Tax Issues
- It Is The First Marriage, and All Children Are From That Marriage
- Both Spouses Agree as to the Ultimate Distribution of the Estate
- You Are Not Worried About Remarriage of the Surviving Spouse and All Assets Ending Up with the New Spouse and His or Her Family
When it comes to estate and family wealth legacy planning, the desire to save costs and make things simple can cause more problems than you realize.
Before you put your kids names on your bank accounts and title to your home, you should speak with an attorney first regarding any possible legal ramifications and liability risk.
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