Danger’s of Making Your Child Co-Owner of Your Assets

By: P. Glen Smith

Granted, I’ve been preaching the message for decades and have a previous blog about placing your child on your accounts as a co-owner. But good folks just don’t seem to understand the reason and importance of the message. An Estate Planning no-no is to put your child(ren’s) names down as joint owners of your assets (bank accounts, home, etc.) because this gives their creditors access to your money. This is a common mistake. In other words, many people believe this is an easy way to avoid probate or allow their child(ren) to assist them with finances. however, it only puts YOU at RISK!

I do a lot of seminars and I continually tell people that if they remember one thing, do not make your child(ren) joint owner(s) of your assets. That is a huge mistake. They may tell me that their son or daughter is very responsible. I ask them if their child drives a car? If they do, everyone else on the road is your potential creditor in a car accident. The daughter-in-law/son-in-law is your potential creditor in a divorce. Your child’s business creditors are your potential creditors. With healthcare, many people are struggling with medical debt. This is the largest single cause of bankruptcy in America, according to the National Consumer Law Center (NCLC).

Illustration #1:

An elderly woman contacted us and said that her home was going to be foreclosed and her bank accounts were being garnished. What had happened? She had put her son on her home deed and accounts as a co-owner. The son was unfortunately involved in a horrific car accident and a huge judgment was rendered against her son. As a result, her son’s creditors were foreclosing on her home and garnishing her accounts to pay her son’s debts.

Illustration #2:

I had a client lose her life savings of $80,000 because her son’s business went under. The bank he owed money to filed liens with other banks to see if he owned any outside accounts. Sure enough, he was listed as a co-owner on the client’s account. Ouch!

A Better Option:

1. Name your child your Durable Financial Power of Attorney and payable-on-death beneficiary to your bank or brokerage accounts. This allows him/her to access those accounts if needed during your lifetime but keeps those assets out of your child’s estate – and away from the hands of his/her creditors.

2. Several banks will allow an authorized signer without being an owner or co-owner of the account. Check with your bank or financial institution.

3. Put a Beneficiary Deed on your home to ensure when you pass away, your home goes to whom you want it to go to and it avoids probate, or give us a call at  Lifescape Law & Development to see if you have any need for a trust to protect your  family and assets.