Have you heard it said, that if you just put your children's name on your bank accounts they will get them when you die? Do you know what's wrong with this advice?
Generally, what's wrong with this advice is that it did not come from an estate planning professional. Where this kind of advice typically comes from are bank tellers and next door neighbors.
Both the neighbor next door and the bank teller are not lawyers, yet they have both been practicing law without a license. And in this credential world we live in you, especially you the reader, would be concerned with taking advice from someone without the right credentials or licenses.
Joint tenancy with rights of survivorship (JTWROS), which is what we are talking about here, does a lot more than give property outright to the other account holder's on your death; it gives it to them while you are alive!! This means that by putting someone else's name on your bank account, your residence, your stocks and bonds, whatever, is actually giving them ownership now!
What most people don't understand is that with a bank account the interest is only taxed to the first accountholder's social security number. So most folks think it is just a form of beneficiary designation as is with a life insurance policy. But, the beneficiary designation on an insurance policy, generally does not have ownership of the policy and cannot change the beneficiary, or cash in the policy before the death of the policy owner. In JTWROS, all parties are owners.
Thus the risks ownership are what we are concerned about here. If you own a piece of property by yourself, and you are sued for malpractice, let's say, that property could be seized to satisfy the plaintiff's judgment, assuming he or she wins the lawsuit. But let's suppose you are on the title of your mom's house and you are sued for the same situation. Would you want mom's house seized to pay for the lawsuit?
This is just one of the many examples of putting your names on Mom and Dad's stuff could cause. Divorce is an even worse example. But, we'll leave this for another article.
Many people may think by putting one of their children's names on their stuff will help facilitate managing their affairs if they become unable to do so. Another problem here is that if the parent is unable to sign his or her name, even in jointly title accounts, the child could not change the accounts in anyway. Here's an example with be with stocks and bonds: without all joint tenants signatures on a security's certificate, you cannot sell, redeem or pledge the stock or bond in anyway. That's because Mom or Dad still owns it, just like you do.
Many people thought incorrectly, that if there was more than one name on an account, then Medicaid would only count part of the account as a resource that would have to be spend to receive Medicaid nursing home benefits. Wrong again! Medicaid looks beyond the title on the account to who actually contributed the money to this account, which is almost always Mom or Dad.
The moral of this story is that when making decisions as important as these are, do not rely on friends, family or bank tellers for your estate planning advice. Seek out a competent, qualified professional to develop a plan to carry-out your well-considered wishes. Here is where you will learn about and consider using three important estate planning tools; the Will, the Durable Power of Attorney, and the Living Trust. Each can help to manage your financial affairs during you lifetime and afterwards, without the risk of giving someone ownership. This equally applies to you and your parents.
