Before You Put Your Kids Names on Your Bank Accounts and Title to Your Home, PLEASE READ THIS ARTICLE!

As I routinely represent clients in both planning their estates and administering their estate after death, I am continually surprised about the number of misconceptions about estate planning and estate planning mistakes that I constantly see.

For instance, I was speaking with a client recently that I met at one of our live educational events on the basics of estate planning. This client told me a story that about 8 years ago him and his wife had their will rewritten. In their will, they created a testamentary trust (a fancy legal phrase for having a trust inside of a will). Their reason for doing this was regarding their son who recently went through a foreclosure and had, for the most part, been extremely irresponsible with money. Therefore, their new will and testamentary trust stated that at their death, their son would get 1/3 of his inheritance at the age of 40, 1/3 at the age of 45, and 1/3 at the age of 50.

When I asked them about their assets they told me that they had an IRA, a brokerage investment account, a few bank accounts, and their home. In total, their estate was approximately $2 million. When I asked them how their accounts were titled, they explained to me that the accounts had their son as beneficiary and their son was listed as the TOD (transfer-on-death) beneficiary on their bank accounts. Finally, they explained to me that they had put their son on the title to their home as a joint owner to create the ease of transition at their death.

Unfortunately, I see mistakes like this all the time. Therefore, I felt it was appropriate to write an article on the dangers of joint accounts.

There are three different types of joint accounts. They are called Tenants in Common, Joint Tenants with Rights of Survivorship, and Tenants by the Entirety.

Tenants in Common is where you own an interest in a piece of property with someone else, or multiple people. For example, let’s say I own a home as Tenant’s in Common with my wife. What this means is that I own a ½ undivided interest in our home. However, what it also means that many people do not realize, is that when I die, my ½ interest does not go to my wife. My ½ interest does not go to my spouse and will go through probate. It is an undivided ½ interest that I can do whatever I want with, and if I do not plan appropriately, this ½ interest will go through probate.

The second type of joint tenancy is called Joint Tenants with Right of Survivorship. This type of joint tenancy does transfer immediately upon death. For example, if I own my home as joint tenants with right of survivorship with my wife, when I die, my interest transfer to my wife, and she owns the entire home in her name alone.

The final type of joint tenancy is called Tenants by the Entirety. This type of joint tenancy is very similar to joint tenants with right of survivorship, but it can only be held by a married couple.

Although, there are several issues with titling your property as joint tenants.

First, it subjects the account and property to the creditor/predator problems of the joint owner. Remember the client’s story referenced above? His son who was irresponsible with money and recently went through a foreclosure. This was not smart for this client to put his son’s name as a joint tenant on his home. The entire asset is now subject to the creditor problems of his son and the home could be subject to seizure and loss.

Second, you lose the estate tax exemption of the husband and wife. As of 2017, there is a $5.48 million estate tax exemption, and for married couples, it can be as high as $10.98 million. In addition, there is an unlimited marital exemption between husband and wife. When you title property as joint tenants, you are using your estate tax exemption that otherwise you wouldn’t have to use. In addition, you are jeopardizing your existing estate tax exemption because you have made a taxable gift that will need to be reported to the IRS. You can gift up to $14,000 to any individual each year (or $28,000 of jointly held assets with a spouse). If you gift over this amount, then you have made a taxable gift that will reduce your $5.48 million estate tax exemption. When you jointly title assets such as a home, financial accounts, etc. with an adult child, you are making a taxable gift that can jeopardize your estate tax exemption.

Third, jointly titling assets may not avoid probate. When you jointly title assets so that all of your financial accounts avoid probate, you still have a will that needs to be probated. Probate is a term that means to prove. This process includes that your will must be proved as valid, all legally enforceable debts must be paid, taxes must be paid, and the remaining property distributed to your named beneficiaries. If there are not enough liquid assets to pay your legally enforceable debts, your executor may choose not to pay them (not a good idea as the executor can be held personally liable for doing so). However, in this case, the executor may have to use these accounts to pay your final debts. Thus, creating a situation where it has to go through probate.

Fourth, as I said above, it creates a taxable gift that will need to be reported, and possibly reducing your federal estate tax exemption.

Fifth, jointly titling assets causes you to lose the step-up in tax basis. When you give an asset at death to another person, that asset receives a step-up in tax basis to the date of death value. For example, if you bought your home in 1980 for $125,000 and in 2025 it is worth $500,000, then when your son inherits your home in 2025, it is worth $500,000 for purposes of calculating his capital gains tax liability when he sells the home. However, if you jointly title your property, you have made a gift, and your son will receive a carry-over tax basis. Your son will receive your tax basis (i.e., the amount that you originally paid for the home). Obviously, this will cause capital gain tax liability for the recipient of the jointly held asset.

Finally, it circumvents the wishes in your will or trust. Remember the story about the client whose son had creditor problems that I discussed above? Well, he wrote a will with a testamentary trust leaving everything 1/3 at age 40, 1/3 at age 45 and 1/3 at age 50. However, he named his son as both TOD beneficiary on his financial accounts and joint owner on the financial accounts. This means that what he wrote in his will and testamentary trust is irrelevant. The joint ownership and TOD designation circumvents the will. Therefore, his son will receive all of his inheritance at once, and based on the statements from this family, will lose all of it to creditors.

However, you may be asking, when should you own assets jointly? First, I cannot think of a single scenario where it is appropriate to jointly title your assets with your children. Although, what about jointly titling your assets with your spouse? It can be appropriate. However, all of the following fact scenarios better apply:

  • You want all of the assets to pass outright to the surviving spouse
  • You have no estate tax issues
  • It is a first marriage and all children are from that marriage
  • Both spouses are in complete agreement as to the ultimate distribution of the estate
  • Both spouses are not worried about the remarriage of the surviving spouse and all assets ending up with the new spouse or the new spouse’s family
  • And, the right kind of joint tenancy is used.


Therefore, before you start naming joint tenants on your property and financial accounts, it’s better to speak with an attorney first and determine whether it is a good idea or not. As I said above, there is no situation that I can think of where putting your adult children as joint or co-owners on your financial accounts and property is a good idea.

Instead, consider a Revocable Living Trust or Durable Power of Attorney. In our next article, I will explain why a Revocable Living Trust or a Durable Power of Attorney is preferable to joint tenancy.

If you have additional questions about joint ownership and the proper alternatives to joint ownership, please give us a call at (615) 472-2482 and we’d be happy to discuss the matter further.


Daniel A. Perry
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Focused on helping seniors, individuals with disabilities and small business owners make informed decisions.
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