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Moving Assets to Joint Ownership is NOT an Estate Plan

Posted by Joel Beck | Jul 11, 2017 | 0 Comments

From time to time, one of the questions we get about estate planning is whether someone should just take all or most of their assets, such as financial accounts and their home, and add a child as a joint owner on that asset. The thinking is usually that doing this may make the process of distributing assets easier upon the person's death, and that the person knows that they can trust their child to “do the right thing” later when the person dies.

Let me be clear: moving assets into joint ownership is not an estate plan. There are several potential problems with this type of an arrangement. Let's look at a hypothetical scenario to see what might go wrong. Suppose that Samantha is 75 years old, and a widow. She has three children, Dan, Adam and Rebecca. Samantha wants to make things easy on her kids when she dies, so she decides to put Dan, the oldest child, on her financial accounts as a joint owner, making the accounts JTWROS (joint tenants with right of survivorship). Samantha also has a home that she owns. She decides to add Adam, her other son, to the deed, listing him as a joint owner, and making the two of them own it as JTWROS. Samantha's plan is for her assets to be split equally among her three children when she dies and she has told her children this verbally.

Here's a few potential problems that might arise in this scenario:

1. As an owner of the financial accounts, Dan now can withdraw funds from those accounts to use as he sees fit, for his own purposes, even if that is not Samantha's intention.

2. The financial accounts may now become subject to Dan's creditors if he gets in financial trouble or gets a big judgment against him. Now, instead of having that money to pay for her needs and expenses, Samantha's money may be spent for Dan's problems.

3. If Samantha is trying to obtain Medicaid benefits, then depending on how things played out, adding Dan as an owner on the financial accounts and adding Adam as an owner on the real estate may be seen as a impermissible transfer making Samantha ineligible for benefits for a period of time.

4. When Samantha dies, the financial accounts owned with Dan as JTWROS, now are fully owned by Dan. They are not going to be distributed through Samantha's Last Will and Testament (assuming she has one), and therefore won't be shared equally with the three children as Samantha may have intended. Dan might share with his siblings, but he might just keep it all himself. Because Dan may have been handling all of mom's financial affairs, paying her bills, taking her to doctor appointments and the like, Dan may believe that he is “owed” all of this money for what he did in service to mom, regardless of whether Samantha wanted her money to be shared with her children. As the surviving owner, the money legally belongs to Dan.

5. With respect to the house that Adam now owns with Samantha during her life, Adam is an owner, and that property may become subject to Adam's creditors.

6. When Samantha dies, the home passes automatically to Adam, the other joint owner. It will not be distributed through Samantha's Last Will and Testament (assuming she has one). While Samantha may have counted on Adam to “do the right thing” and sell the home and split the money with his siblings, Adam may choose not to do that. It is his property and he can keep it himself or sell it and keep all of the proceeds. Adam may decide to keep it, after all, he had been handling all of the maintenance and upkeep of mom's property for many years, and he thinks he deserves it for all he has done. As the surviving owner, the home legally belongs to Adam.

7. What about Rebecca here in this situation? Well, if all of the financial assets were held as JTWROS with Dan, and all the real estate held JTWROS with Adam, then Rebecca will not inherit any of that property when Samantha dies. Samantha's “planning” by adding a couple of her kids as account or asset owners may effectively then disinherit Rebecca.

The Lesson is this: Moving Assets into Joint Ownership is Not an Estate Plan.

Get a real, solid estate plan in place, customized to your situation, and your goals and objectives. Contact The Beck Law Firm, LLC today for more information on estate planning.

About the Author

Joel Beck

Joel Beck founded The Beck Law Firm, LLC in 2007. His firm focused on business law and estate planning needs of clients, two areas that he was drawn to based upon personal and business experiences in his life, including a ten-year career at NASD (now known as FINRA).


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