Why Joint Ownership Can Undermine Your Estate Plan and What to Do Instead
It is a commonly held belief that putting a child or loved one on a bank account or property deed can be a straightforward way to avoid probate and make things simpler for loved ones. However, joint accounts can be very problematic and can undermine even the best-planned estate plans.
It’s important to understand the pitfalls of joint accounts, especially if you are older and want to ensure your assets are protected and your family members do not fight over your estate.
The hidden risks of joint ownership
When you make someone a joint owner on a bank account or deed, you are not simply allowing them access for their own convenience. You are also giving them a present ownership interest in that account or deed. This can have consequences that you are not aware of.
One example of this is that when you make a bank account a joint interest account, the account will go to the survivor of the two of you when one of you dies, regardless of what your will or trust says. This can have the effect of cutting out all the other beneficiaries that you intended to leave your estate to.
Joint ownership also puts your assets at risk in case the person you are making a joint owner experiences financial difficulty. For example, if your child gets sued, gets divorced, files for bankruptcy, or gets into financial difficulties with creditors, the money or house that you own can be at risk, even though it was originally yours.
Family conflict with elder law concerns
One of the most common issues that lead to family conflicts involving joint tenancy is that family members may suspect that one of the joint tenants could have coerced or taken advantage of an elderly parent.
Joint tenancy accounts are commonly scrutinized in elder law cases when there are concerns about possible cognitive decline. What started out as a convenient method of account maintenance can be viewed as an improper transfer in the future, causing all parties involved to become stressed legally and emotionally.
Tax and Medicaid implications
Joint ownership can also have tax implications. Making someone a joint owner on a deed can be subject to gift tax reporting, which may affect the capital gains tax that will be applied in the future.
From a Medicaid standpoint, joint ownership can have adverse effects on your eligibility. It can be considered a gift subject to penalty periods, even if no money was involved. These penalties can result in delayed long-term care services when they are most desperately needed.
Talk to a Virginia Beach, VA, Elder Law Attorney
The Law Office of Angela N. Manz represents the interests of Virginia Beach residents who are looking to update or draft an estate plan. Call our Virginia Beach estate planning lawyers today to schedule an appointment, and we can begin discussing your next steps right away.