Estate planning is important for everyone regardless of age or financial status. We will all pass away one day, and most of us want our assets to go to our loved ones right away. Many think that adding a child to their home deed or to their bank accounts will mean that they have access to assets quicker because they won’t get tied up in probate court. Adding a non-spouse as partial owner of your assets (like your home and money) is called joint tenancy. Joint tenancy is a type of arrangement that is commonly used by couples and business partners. If one partner passes away, the remaining partner will receive full ownership of any joint assets immediately and avoid probate.
In theory, this sounds like a good idea. But, there are many potential pitfalls. Here are a few things that you should consider before adding your child as joint owner to your assets.
- You may need mutual consent for anything you do with certain assets. If you add your child as a joint tenant, you are essentially giving ownership rights to your child for those assets. Consider the case of a house held in joint tenancy. Because your child is now a co-owner, he or she would have to agree with any choices you make- including the wish to sell. What if the co-owner refuses or disagrees? Such a situation could ensnare you in a battle you never saw coming.
- What if something happens to your child? If the child you name as co-owner files for bankruptcy, divorce, or gets sued, any assets that are in their name, including joint assets, will be at risk.
- Depending on circumstance, your bank accounts could be frozen when you pass away. If you have debts, the court could freeze your accounts to stop the co-owner from liquidating the account to avoid those debts. This means your child would not have immediate access to your funds, as you desired. Further, if the court suspects that the child was a joint owner just for convenience (or to simply avoid probate), and did not actually contribute, then the court can step in and freeze the accounts. In either situation, a joint tenancy can create a lot of problems. Not only would the accounts be frozen but your family would be faced with a long and costly legal process to settle your estate.
- The survivor may do anything they please with the assets. Once the joint tenancy is created, your child becomes a joint owner of the assets in question. However, once you pass away, he or she then becomes the sole owner, and has total power to do whatever he or she wants with the inheritance. Maybe you have a “hand-shake” agreement on how your assets will be divided, but your co-owner is under no legal obligation to follow that agreement once they become the sole owner. Any heirs that were to benefit from such an agreement would have very little legal recourse.
Probate in Ohio can be a long and arduous process, and it usually makes sense to avoid it, if possible. However, creating a joint tenancy with a child is probably not the best estate planning choice. There are many more effective legal strategies available to protect your assets and avoid probate. To inquire about these options please call the Jarvis Law Office today at 1-877-653-3450 to set up a consultation.