Joint Ownership of Property

The most common form of ownership for bank and investment accounts is “joint tenants with right of survivorship.” The concept is that upon the death of the first owner the property immediately transfers to the second owner. While this form of ownership may be appropriate for some, especially married couples, there are at good reasons to consider other strategies.

A client was named as a joint owner on his father’s accounts. He was an only child. The purpose was to enable my client to act on his father’s behalf should the father become unable to act—a perfectly good and common reason for using joint ownership. My client, realizing his own mortality, decided to take similar action, putting his son on his accounts. Unbeknownst to my client, the son had substantial delinquent child support. When the State authorities discovered the existence of the account, they took the unpaid amounts from the joint account, taking most of my client’s savings. There are other methods that could have been used to accomplish the same goal.

An elderly client had two children, one living locally and one living in another state. The client’s goal was to leave everything equally to her children. As is common, she put the one local child on the account. As it turned out, the children did not get along with each other. When my client died, the account transferred to the child named on the account, leaving the other child with nothing—an ugly situation.

Time and time again I have seen people engage in extensive estate planning to minimize future estate taxes, care for disabled children or to leave a charitable bequest. Joint ownership can defeat the best of planning.

My advice—talk to your advisor before setting up joint accounts. Not only can you avoid the issues mentioned above, but you can also eliminate potential gift tax reporting. There are a multitude of techniques to avoid the issues mentioned above, and all of them might involve invested some money in professional fees, but to ignore the situation is to create future problems for you and your family.

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