Can You Avoid Probate By Placing Your Assets In Joint Names?

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THIS MAY CAUSE BIGGER PROBLEMS FOR YOU AND YOUR FAMILY

THERE ARE FOUR BIG DANGERS TO HAVING ASSETS IN JOINT NAMES

Often, older people will add the name of one or more of their children to their checking accounts or brokerage accounts .They might do this to make it easier for the children to help them with their financial affairs. Or they might think that it’s a clever way to avoid probate.

Joint ownership can be good in some cases, but there are dangers in setting things up this way.

To illustrate, imagine that Anna has three chil­dren -Barry, Louise, and Todd -and she adds their names to some of her various accounts so they can help her with her finances. What could go wrong?

  • A CHILD’S DEBT | Suppose Barry loses his job, and runs up large debts. Since Barry is a joint owner of one of Anna’s accounts, his creditors could poten­ tially come after Anna for repayment Or suppose Barry owns a business and guarantees a loan.If the business goes under, Anna could be on the hook.
  • A LAWSUIT | Suppose Louise causes an auto ac­ cident, and the injured driver sues her. The driver might be able to empty Anna’s bank account as well as Louise’s.
  • A DIVORCE | If Todd gets divorced, his wife could potentially claim some rights over a joint account. If Todd’s wife makes a claim to divide an account, Anna might be required to trace and prove the entire his­ tory of her contributions to it.If she can’t do so, then Todd’s wife might have a claim on it.
  • A FAMILY FIGHT | When Anna dies, any assets in her joint accounts will go to the co-owners named on those accounts. If Anna has a will that divvies up her other property, it won’t cover the joint accounts. If Anna intended to ultimately split her property evenly among her children, that might not happen. And even if one sibling wants to make things right and offers to even things up with the others, this might create gift tax problems.

An estate planner can suggest alternative ways to avoid probate and allow children to help with finances.

 

Father’s Gift to “Y’all” Could Be Divided At Divorce

Fight For MoneyA father in Virginia gave his married daughter a check for $15,000, and told her it was a gift for “y’all.” The daughter and her husband used the money to fix up their home, which they jointly owned.

Later, the couple divorced.

The husband argued that the money was a joint gift, and thus he was entitled to a share of it in the divorce. The wife argued that it was a gift to her and that she didn’t have share it.

So the case turned on the legal definition of “y’all.” Did that refer to just the daughter, or the couple?

Be careful with family gifts if the recipient is contemplating a split.

A judge ruled that the gift was for the couple, and thus it could be split at divorce. This was partly because the father said he intended it for “y’all”: but also because the money was used to improve joint property – so regardless of how the gift was intended, it was converted into a joint asset.

The idea of a judge analyzing the legal significance of “y’all” might be amusing, but the larger point is very serious: If a person is contemplating divorce and also might be receiving a gift or an inheritance, it’s very important to speak with a family law attorney about how to make sure the assets remain separate.

There might not be a foolproof way to keep a gift or inheritance from becoming divisible at divorce, but you can improve your odds dramatically if you’re careful about how the gift is transferred, and if you make sure the assets aren’t put into a joint account or used for a joint purchase.