Many times, while meeting with people about their estate plans, we are told that a son or daughter or friend has already been put onto a bank account. The reasons are innocent enough, and usually involve a fear that the son or daughter or friend will not be able to quickly access the money if something happens to the owner.
The rationale is easy to understand. We want our successors to be able to seamlessly access our funds if we become incapacitated and can’t manage the funds ourselves. We do not want to burden our heirs with waiting for a long probate process just to gain access to the bank account. It is understandable, but it is usually not the best idea.
There are a number of things that can go wrong when you add another person to your bank account, or worse, to the title on your house. First, adding someone to the title usually makes that person a joint owner. Depending no the situation, this may be considered a gift subject to gift taxes.
Second, a joint owner is another source of potential liability. What if the other person is sued, owes taxes, or files bankruptcy? Any of these events will almost certainly have an effect on the property that you now hold jointly with that person – whether it is a simple checking account or your house.
Third, in the case of real estate, it is impossible to change your mind without the other person’s consent. Once someone is on title with you, that person has equal rights to the property and cannot be removed by you. Worse, that person now has the absolute right to actually move in and live with you! In the case of a bank account, although you may have intended the joint owner to access it only if you become incapacitated or pass away, that person can actually have immediate access to all of the funds in that account, for any reason.
There are vastly better options for avoiding probate and for arranging the seamless transfer of control in the event of a debilitating illness or accident. Simply adding people to your bank accounts and real estate is almost never the right solution.
Every situation is unique, so to know the exact legal effect on you and your property if you are considering adding someone to your account or real estate deed, you should seek the advice of an attorney experienced in estate planning. Lopez & Wilmert, LLP has attorneys who specialize in this area of the law, ready to meet in either of our San Diego County offices. Schedule an appointment by calling 619-589-1112.