Is It A Good Idea To Add Your Child To Your Home's Title or Bank Accounts To Avoid Probate?

Raziel Ungar

Raziel Ungar

April 9th, 2012 - 2 min read

This is a guest post by Nancy H. Rossi, an estate planning attorney at Nancy Rossi Law in San Mateo.

A parent will often consider adding a child as a joint tenant to the title of their real property (family home) or bank accounts as a means of avoiding a probate of the property on the parent's death or as a way to allow a child to gain access to the asset if the parent becomes ill.  Joint tenancy is the co-ownership of property between two or more people, and by law, each of the joint tenants must own equal shares of the property. Upon the death of one of the joint tenants, the remaining joint tenant(s) become the immediate owner(s) of the property. The succession of property through joint tenancy does not require a probate and it can be an effective way to transfer assets from a parent to a child. However, joint tenancy is not without drawbacks and may result in unintended consequences.

For example, once a child is added as an owner of a bank account or real property, there is a danger that the child will withdraw all of the funds or encumber the property without the parent's permission.  The transfer from parent to child may also be deemed a gift that could trigger a gift tax consequence or may make the parent ineligible for government benefits to pay for his or her nursing home care. In addition, if a parent names only one of the children as a joint tenant, the named child will inherit the account or real property to the exclusion of his or her siblings.  The parent may intend for all children to inherit equally, however, there is no legal requirement for the named child to share with his or her siblings and the siblings have no right to the asset regardless of whether the parent left a Will which states otherwise.

Real Estate = Big MoneyAlso, the joint tenancy property becomes liable for the child's debts and the child's creditors can come after the account or real property if the child files for bankruptcy.  The real property or bank accounts held in joint tenancy will also be counted as the child's assets if the child gets divorced.  As a result, the parent may end up owning their home with the child's ex-spouse or the parent's assets may be attached to pay for the child's obligation to pay child support.  The parent's property can also be attached to pay state and federal tax liens against the child and may be exposed to liability from a lawsuit.  For example, if the child is in an automobile accident which injures a third party, the child's proportional share of the joint tenancy assets may be used to satisfy a judgment in favor of the injured party.

Finally, if the parent and child relationship becomes estranged, the parent may lose control of the property (home).  The parent may be forced to allow the child to live in the property rent-free and the parent may not be able to sell the property without the child's consent.

The use of joint tenancy will avoid probate and may be an effective estate planning tool in certain cases. However, a parent should consider the associated risks. A better alternative may be to execute a revocable living trust to hold the assets. A trust would allow the parent to name a successor trustee to take over after the parent's death and the trust will designate how the assets are to be distributed on the parent's death.  It will also make provisions if the parent is incapacitated, but it protects from inappropriate withdrawals without the need for a conservatorship.  Most importantly, a trust will protect the real property and bank accounts from the creditors of the beneficiaries.

This article is intended to provide general information and should not be relied upon as legal advice.  You should consult with an attorney about your particular circumstances before taking any action.

If you're considering buying Burlingame real estate or a home in the Burlingame area, please drop Raziel a line.

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