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What do Advisors Worry About? Putting Kids on Mom and Dad's Accounts

What do Advisors Worry About? Putting Kids on Mom and Dad's Accounts

August 18, 2022

In a previous blog post, we talked about how important it is to list a beneficiary on your different investment accounts because it avoids probate. But, is it a good thing to list your children as a joint owner on your bank account or on your home?

We typically do not recommend adding children as joint owners on your assets because that means your asset would become exposed to any legal or financial dealings that your child may have. For example, if your child gets divorced, then your home could become part of the divorce settlement. Also, if your child gets sued, then your asset could become liquidated to satisfy that debt.

The co-owner also, now has full access to the assets. Please note that joint owners are easy to add but can be hard to remove. All owners will need to agree on the removal, which could be difficult if there is a strained relationship.

Another thing to consider is, the co-owner will inherit the entire account upon your death. If that individual is the sole beneficiary of the estate, this might work out.  If not, this could go against what your will/ estate plan dictates, and one child could get more than the other.

Co-ownership of a home, as mentioned above, is different than a life estate but this comes with its pros and cons as well. A life estate is a legal document that conveys the ownership of your home from yourself (while you’re alive) to the stated person when you pass away. The pros are you will avoid probate, you may be able to qualify for Medicaid benefits while protecting the property and the life estate cannot be used to satisfy your creditors once you pass. The cons are: your home would become exposed to any legal or financial dealings that your child may have and life estates are often times inflexible because you cannot change the beneficiary without their consent. We recommend that you talk with an elder care attorney on a plan that is best for you and your family!