Planning Gone Wrong: Adding Children to Your Assets

As people get older, the asset succession and access becomes an important topic to address. Unfortunately, most people don’t know what they don’t know when it comes to proper estate planning. A common strategy used by elderly individuals is to add their child(ren) to their house deed and their bank/deposit accounts to “make things easier” for them. Unfortunately, this type of planning strategy comes with some substantial risks.

Ownership Cuts Both Ways

Adding a child to your accounts and home may allow them to have access to your money, but that comes with some significant downside. If you have a parting of ways, for whatever reason, your child may be able to withdraw your money without your consent being needed. They may also act as a blocker to selling your home if needed.

Creditor Attachment

Joint ownership with your kids means that your kids have an undivided ownership interest in your assets, which will also make them available, at least to the extent of the ownership interest, to the creditors of your kids. This may include financial creditors, personal injury plaintiffs, or spouses during a divorce. Ownership comes with the pros and the cons.

Estate Involvement

If your child owns an interest in your assets and predeceases you (dies before you do), their plan or lack of a plan (intestacy) may have an impact on your assets. If they are on the deed to your house, their heirs may now become your co-owners instead. Joint ownership of financial accounts with one child may also result in your other children, if any, being cut out of their share of that/those accounts. Joint ownership of your home may have the same result depending on how it’s titled.

A Better Way

Generally the interests of access and ease of succession can be accomplished without adding kids to your assets. A Financial Power of Attorney may be used by a named agent (also known as an “Attorney-in-Fact”) to access your financial accounts or sell your home if needed. And adding a “TOD” (transfer-on-death) or “POD” (payment-on-death) to your children can allow them to receive your accounts immediately after you pass.

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