If you or someone you know has ever been through the tangled web of the probate process, you would probably do almost anything to avoid going through it again. While there are many estate planning strategies that can prevent the probate of an estate, some of the ones that seem relatively simple may cause the most problems.
One of these techniques is to add a child’s name to your bank account. The theory behind this is that, when you die or cannot tend to your financial affairs, your child can use the account to pay any of your bills or pay for your care out of that account. This may seem like an easy or convenient way to accomplish this goal but it can actually end up emptying the account.
First, even though your child’s name is also on the account, either of you has access to all the funds in the account at any time. Just because there are two names on the account does not mean that the money in the account is split 50-50. So if you need long-term care or have other medical expenses that would otherwise allow you to collect benefits, all of the money in the account will be counted as yours. Depending on the amount in the account, it could preclude you from receiving some benefits.
Second, since your child’s name is on the account, all of the funds are subject to numerous kinds of peril. If your child is sued, all of the funds could be subject to any judgment against him or her. If your child goes through a divorce, all of the money could be counted as assets in calculating alimony or child support. If your child becomes disabled, just as it would apply to you as mentioned above, the funds in the account could prevent your child from receiving benefits.
As you can see, while one of the easiest ways to avoid probate is to create joint ownership in some of your assets, it may also be one of the most dangerous in terms of preserving those assets. Before making even a seemingly simple move like this, consult an estate planning attorney who can help you understand the pitfalls and suggest better alternatives.
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