Joint Ownership is Not Aways a Good Idea

 In Branding

We see people from all walks of life who are positive that joint ownership is always the best way to own an assets, whether that asset is a checking account, a savings account, a CD, the family home and just about anything in between.  In fact, we have had clients tell us that certain bank officials have told them that they must have at least one other name on all of their accounts.  Yet, as with many “absolutes”, this one too has some exceptions.

First, a little background. Having only one name on an asset, that is, an asset without a joint owner or a designated beneficiary, does present the problem that at death, such asset would have to go through the Probate Court process.  Seldom, if ever, is that a good idea! 

What seems to motivate the giving of the advice to “put someone else’s name on all of your assets” is the desire to avoid probate.  Since avoiding probate is usually a good thing, what’s wrong with joint accounts?

First, the use of joint accounts is just one way to avoid probate. Another very common way to “avoid probate” is, as described above, to use a designated beneficiary.  For certain assets, especially life insurance, IRAs, annuities, CDs and stock brokerage accounts, this is easy to accomplish.

Most people are used to thinking about beneficiaries with the above assets.  Unknown to a lot of people is that you can also have designated beneficiary arrangements with checking accounts, savings accounts and other assets.  Even real estate can be structured in a way that is almost identical to a designated beneficiary.

Many people like the use of beneficiary designations because they understand that with beneficiary designations, they keep absolute control of the asset, during their lifetime.  Unlike a joint owner, the beneficiaries do not get to exercise control until after the owner has passed away.  The owner gets to enjoy sole control during their lifetime.  The owner is safe from the actions of the beneficiaries and most importantly, safe from those people who for some reason might sue the beneficiary for something completely unrelated, such as a car accident, divorce, business problem or other claim.  For that reason, the use of designated beneficiaries might be safer than the use of a joint account.

Another potential problem with the use of joint accounts is that it often times leads to unintended results. A prime example is where a person has a joint account with one child and a Last Will and Testament that says everything is to be divided equally between three children.  Guess who wins that one?  If you guessed “the lawyers”, you guessed right. Though proper estate planning might start with an attorney’s help, in the end, “keeping lawyers out of it” or better stated, having planned your estate correctly so that your wishes are clear, goes a long way in avoiding conflict.

From a Medicaid/nursing home planning viewpoint, the use of joint ownership can sometimes be disastrous.  I know that sounds like an exaggeration, but think through the following example.  One half of a married couple is in a nursing home, possibly close to getting on State aid, when the other spouse dies unexpectedly. Suddenly, the spouse in the nursing home is now holding all of the couple’s assets and has substantially increased the risk of loss of assets before qualifying for State aid. Proper planning, which in this case means before someone passes away, is the key to achieving successful results.

As with the most areas involving technical difficulty, this type of planning is best accomplished with the help of experienced professionals. The subject of joint ownership involves issues of property law, banking law, wills, probate, tax law and in some instances Medicaid law.  Don’t do it alone. Get good help.

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