Many individuals, in order to avoid legal fees and avoid their estates going to Probate Court – put all of their assets in joint ownership with other family members.
Does this work? Sometimes it works just fine. Sometimes it creates a massive legal and financial mess.
Mom, a widow, places her home in joint ownership with a son to avoid Probate. What could go wrong?
• If mom wants to sell the home and move into a condo, her son could refuse to sell – he now has an ownership interest and she needs his agreement
• If son has legal difficulties – a car accident over his policy limits or a business deal gone bad – mom’s home could be a target for creditors.
• If son fails to pay his income taxes, the IRS could lien mom’s property
• If mom and son are in a fatal accident together – who gets the property now?
Mom, a widow, has three children. She has three bank accounts and places each one of them in joint ownership with a different child. What could go wrong?
• One of her children goes through a divorce. That child must now list that account as an asset when he/she is dividing assets as part of the property settlement process
• Mom uses all of one account, half of another, and doesn’t touch the third. Does that mean that she wanted one child to get all of the money in the one account? The second child to get the 50% remaining in the second account? And the third child to get nothing?
Mom, a widow, has three children. She places all of her assets in joint ownership with one child because she knows that this child will “do the right thing” and share the assets with the other two. What could go wrong?
• Mom gets sick and arguments break out over the type of care that mom should have – some siblings want her to go to a nursing home and others want to preserve mom’s money – the kids end up not speaking. Upon mom’s death, the child on the account, angry with the other two announces that legally she is entitled to the money and the house as she is joint – leaving the other two with nothing.
• Mom gets sick. The child on the account cares for mom during her illness and disability without much assistance from the other two. Upon mom’s death, the child on the account, angry that the others would not assist with mom’s care announces that legally she is entitled to the money and the house as she is joint – leaving the other two with nothing.
• Mom gets sick. A child other than the one on the accounts cares for mom during her illness and disability without assistance from the other two. Angry words are exchanged concerning the appropriateness of mom’s care and the amount of mom’s money that is actually being used up when she is in a child’s home. Upon mom’s death, the child on the accounts announces that legally she is entitled to the money and the house as she is joint – leaving the other two with nothing. And leaving the child who was the care giver out in the cold.
These are the unintended consequences that occur from joint ownership as an estate plan. These things really do happen.