Thursday, July 3, 2014
When two or more owners have rights to an asset they have effectively created a “joint tenancy.” While creating a joint tenancy may help avoid probate and automatically pass those assets to the persons named on the accounts, there are other adverse consequences of joint tenancy, which many people are unaware.
By putting your children’s (or another family member’s) names on your assets, you relinquish control of those assets. Though this may not seem like an issue, it oftentimes turns out to be one. A parent who puts their child on the deed of their house must seek permission before the house can be sold.
If you put your child on your bank or brokerage account, then they will have the same access to it that you would have. During your lifetime, they will have access to your business, including the ability to withdrawal money for themselves.
Furthermore, if you put your child’s name on your home or account, you are subjecting your assets to the circumstances of your child’s life. For example, if your child whose name is on your house gets sued, divorced, or files for bankruptcy, his or her creditors may attempt to collect against your assets.
There are other options besides joint tenancy that allow your assets to evade probate and pass to heirs.
See Robert Schwartz, Understanding the Pitfalls of Joint Tenancy, TC Palm, July 2, 2014.